1. Suppose Firm A sells its output in a perfectly competitive market at a price of...

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1. Suppose Firm A sells its output in a perfectly competitive market at a price of $20 per unit. The firm also hires its labor in a perfectly competitive market at a wage rate of $300 per laborer. Complete the table for MPL, and MRP, Total Product 20 60 95 128 153 168 173 170 # of Laborers 1 2 a. What is the maximum wage the firm would be willing to pay laborer #4? b. At a wage of $300 per day, how many laborers will the firm hire? 1 2 3 4 5 6 7 8 3 4 5 6 7 Total Output c. Suppose, due to a lack of popularity, the price of the good drops to $10.00 per unit. Calculate the new values for marginal revenue product for the MRP, columin d. Given the change in Part C, how many laborers will the firm hire at a wage rate of $300 per day? e. Ignore the change in product price in part C. Now suppose that a new technology increases labor productivity by 10 units for each laborer. Would the firm's demand for labor increase or decrease? Why? 20 60 MPL, 20 40 95 125 2. Suppose Firm B sells its output in a monopalistically competitive market. The firm hires its workers in a perfectly competitive labor market at a wage rate of $300 per worker. Complete the MPL column in the table below. # of laborers 140 150 155 MPL 35 33 20 40 3.5 30 15 10 5 25 15 5 -3 $660 6 Price MRP, 400 800 700 660 500 $10 $9.50 When there is an increase in productivity there is an increase in profits of each laborer hired, so the demand for labor would increase in response to the technological development. $9.00 $8.50 $8.00 $7.50 $7.00 300 100 -60 Total Revenue 200 570 855 1062.5 1120 1125 1085 MRP 200 400 350 330 250 150 50 -30 Marginal Revenue 10 9.25 B.14 6.92 3.83 5 -8 MRP 200 370 285 207,5 57.5 5 -40 a. Calculate Total Revenue, Marginal Revenue, and Marginal Revenue Product for the chart. b. What is the maximum wage the firm would pay for laborer 5? The MRP of the 5th laborer is $57.50 so the wage of this employee cannot exceed this price 57.50 is the maximum amount of revenue the firm gets from this worker, they would be losing revenue if they were to pay the laborer more than this. d. Graph the MRP, data for Firm A from Problem #1 and the MRP data for Firm B from this problem on the same graph. c. Explain why the firm would not be willing to pay the worker more than that amount. e. On the graph, insert the $300 wage rate and identify the profit maximizing level of output for each firm. f. How does the quantity of labor hired differ between the firms? 1. Suppose Firm A sells its output in a perfectly competitive market at a price of $20 per unit. The firm also hires its labor in a perfectly competitive market at a wage rate of $300 per laborer. Complete the table for MPL, and MRP, Total Product 20 60 95 128 153 168 173 170 # of Laborers 1 2 a. What is the maximum wage the firm would be willing to pay laborer #4? b. At a wage of $300 per day, how many laborers will the firm hire? 1 2 3 4 5 6 7 8 3 4 5 6 7 Total Output c. Suppose, due to a lack of popularity, the price of the good drops to $10.00 per unit. Calculate the new values for marginal revenue product for the MRP, columin d. Given the change in Part C, how many laborers will the firm hire at a wage rate of $300 per day? e. Ignore the change in product price in part C. Now suppose that a new technology increases labor productivity by 10 units for each laborer. Would the firm's demand for labor increase or decrease? Why? 20 60 MPL, 20 40 95 125 2. Suppose Firm B sells its output in a monopalistically competitive market. The firm hires its workers in a perfectly competitive labor market at a wage rate of $300 per worker. Complete the MPL column in the table below. # of laborers 140 150 155 MPL 35 33 20 40 3.5 30 15 10 5 25 15 5 -3 $660 6 Price MRP, 400 800 700 660 500 $10 $9.50 When there is an increase in productivity there is an increase in profits of each laborer hired, so the demand for labor would increase in response to the technological development. $9.00 $8.50 $8.00 $7.50 $7.00 300 100 -60 Total Revenue 200 570 855 1062.5 1120 1125 1085 MRP 200 400 350 330 250 150 50 -30 Marginal Revenue 10 9.25 B.14 6.92 3.83 5 -8 MRP 200 370 285 207,5 57.5 5 -40 a. Calculate Total Revenue, Marginal Revenue, and Marginal Revenue Product for the chart. b. What is the maximum wage the firm would pay for laborer 5? The MRP of the 5th laborer is $57.50 so the wage of this employee cannot exceed this price 57.50 is the maximum amount of revenue the firm gets from this worker, they would be losing revenue if they were to pay the laborer more than this. d. Graph the MRP, data for Firm A from Problem #1 and the MRP data for Firm B from this problem on the same graph. c. Explain why the firm would not be willing to pay the worker more than that amount. e. On the graph, insert the $300 wage rate and identify the profit maximizing level of output for each firm. f. How does the quantity of labor hired differ between the firms?

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