Download Zadanie 1

List 9
The markets for labor
Task 1.
The firm sells on the perfectly competitive market of products and factors of production. The price of
sold goods is equal to 2 euro.
a) Fill in the table and mark the level of employment, which will maximize the firm’s profit, it the
wage is equal to 600 euro.
b) Calculate the firm’s marginal profit.
L: numer of workers
Q: Output
1
2
3
4
5
1000
1600
2000
2300
2500
MPL: Marginal
product of labor
VMPL: Value of the
marginal product of
labor
Marginal profit
Task 2.
The firm sells its goods on the monopolistic market. Fil in the table below and define what is the
optimal level of employment, if wage is equal to 4000 euro.
L: numer of workers
Q: Output
1
2
3
4
5
500
900
1200
1400
1500
MPL: Marginal
product of labor
Marginal revenue
VMPL: Value of
the marginal
product of labor
200
160
120
80
40
Task 3.
The firm sells its goods on the competitive market. Market price of the sold goods is equal to 5$. On
the labor market the firm is monopsony (there are no other employers apart from this firm). Fill in
the table and answer how many workers and at what wage should the firm employ to maximize its
profits?
L: Number of
workers
w: wage
1
2
3
4
5
6
7
8
50
60
70
80
90
100
110
120
TC of labor
MC of labor
Q: Output
50
140
240
310
350
380
400
410
Microeconomics
Dr Anna Kowalska-Pyzalska
MPL
VMPL
List 9
The markets for labor
Task 4.
The firm sells its good on the competitive market. Market price of the sold goods is equal to 2$. On
the labor market the firm is monopsony.
a) Fill in the table.
b) How many workers and at what wage will the company hire to maximize its profit?
c) Suppose that the total cost of labor is the only variable cost. Fixed cost are equal to 600$. What
would be the profit in the optimal production level?
L: Number of
workers
w:
wage
10
20
30
40
50
60
70
4
5
6
7
8
9
10
TC of labor
MC of labor
Q: output
TR
MPL
VMPL
500
575
645
695
740
780
815
Task 5.
The table below presents the MPL and VMPL of the two sort of inputs: input A and input B. Price of
the input A is equal to 2, and the price of the input B is equal to 3.
a) What combination of input A and B will maximize the company’s profit?
b) At what kind of market will the firm sell its goods and at what price?
c) What is the total output, total revenue, total cost and total profit when the company engages
the optimal combination of inputs A and B (calculated in point a))?
Output QA
MPLA
VMPLA
Output QB
MPLB
VMPLB
1
10
5
1
21
10,5
2
8
4
2
18
9
3
6
3
3
15
7,5
4
5
2,5
4
12
6
5
4
2
5
9
4,5
6
3
1,5
6
6
3
7
2
1
7
3
1,5
Microeconomics
Dr Anna Kowalska-Pyzalska
List 9
The markets for labor
Task 6.
The firm sells on the competitive market. In the table the dependence between labor and output is
presented. The price of sold good is equal to 2$, and the wage is equal to 5$.
Calculate:
a) MPL and VMPL
b) How many workers will be hired?
c) What will be the outcomes it:
1. The wage increases to 7$, ceteris paribus?
2. The market price of good increases to 3$, ceteris paribus?
3. The output is twice as big, ceteris paribus?
L
1
2
3
4
5
Q
5
9
12
14
15
MPL
VMPL
Task 7.
Suppose a freeze in Florida destroys part of the Florida orange crop.
a) Explain what happens to the price of oranges and the marginal product of orange pickers as a
result of the freeze. Can you say what happens to the demand for orange pickers? Why or
why not?
b) Suppose the price of oranges doubles and the marginal product falls by 30 percent. What
happens to the equilibrium wage of orange pickers?
c) Suppose the price of oranges rises by 30 percent and the marginal product falls by 50
percent. What happens to the equilibrium wage of orange pickers?
Task 8.
Suppose that labor is the only input used by a perfectly competitive firm that can hire workers for
$50 per day.
The firm’s production function is as follows:
Days of labor
0
1
2
3
4
5
6
Units
output
0
7
13
19
25
28
29
of
Each unit of output sells for $10. Plot the firm’s demand for labor. How many days of labor should
the firm hire? Show this point on your graph.
Microeconomics
Dr Anna Kowalska-Pyzalska