Assume the firm is a monopolist: Demand for labor is VMP = 35 0.004E, supply of
Question:
Assume the firm is a monopolist: Demand for labor is VMP = 35 – 0.004E, supply of labor is w = 5 + 0.01E, and Marginal cost of hiring workers is MC = 5 + 0.02E
a. How much labor does the firm hire and at what wage when there is no minimum wage?
b. How much labor would be employed if this was a perfectly competitive market?
c. Draw the diagram and show the deadweight loss? Mark the point on the diagram where employment would be if this was a competitive industry.
d. What is the size of the deadweight loss (DWL)?
e. How much labor does the firm hire and at what wage when it must pay a minimum wage of $25?
f. What minimum wage should the government set to eliminate the DWL?
g. What would be the effect of minimum wage that is set beyond the min. wage found in part d?
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba