5. Consider a perfectly competitive, profit-maximizing firm facing the following marginal product of labor function and...
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5. Consider a perfectly competitive, profit-maximizing firm facing the following marginal product of labor function and prices: MPL = A(K/L) 1/2 W = $40 R = $64 P = $8 a. What is the real wage rate paid by this firm? b. If total factor productivity (A) is 20 and the firm is employing 36 units of capital (K = 36), what will the firm's quantity of labor demanded (Ld) be? c. If the nominal wage (W) rises from $40 to $120, what will the new real wage rate be? All else equal, what would the firm's quantity of labor demanded (Ld) be at that new wage rate? d. If the nominal wage (W) rises from $120 to $160, what will the new real wage rate be? What will the firm's quantity of labor demanded (L) be at that new wage rate? e. Assuming that A = 20 and K = 36, graph the firm's labor demand curve (quantity of labor demanded graphed against the real wage paid for labor) for values of the real wage between 5 and 20. f. Now suppose that total factor productivity increases from 20 to 30. Capital employment remains fixed at 36. Graph the new labor demand curve. Be sure to plot at least 3 distinct points. 5. Consider a perfectly competitive, profit-maximizing firm facing the following marginal product of labor function and prices: MPL = A(K/L) 1/2 W = $40 R = $64 P = $8 a. What is the real wage rate paid by this firm? b. If total factor productivity (A) is 20 and the firm is employing 36 units of capital (K = 36), what will the firm's quantity of labor demanded (Ld) be? c. If the nominal wage (W) rises from $40 to $120, what will the new real wage rate be? All else equal, what would the firm's quantity of labor demanded (Ld) be at that new wage rate? d. If the nominal wage (W) rises from $120 to $160, what will the new real wage rate be? What will the firm's quantity of labor demanded (L) be at that new wage rate? e. Assuming that A = 20 and K = 36, graph the firm's labor demand curve (quantity of labor demanded graphed against the real wage paid for labor) for values of the real wage between 5 and 20. f. Now suppose that total factor productivity increases from 20 to 30. Capital employment remains fixed at 36. Graph the new labor demand curve. Be sure to plot at least 3 distinct points.
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Related Book For
Microeconomics
ISBN: 978-1464187025
2nd edition
Authors: Austan Goolsbee, Steven Levitt, Chad Syverson
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