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ECON 1 Lecture Notes - Lecture 15: Monosomy, Marginal Product, Demand Curve

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pinkhedgehog498
2 Nov 2018
School
UCSB
Department
Economics
Course
ECON 1
Professor
Ryan Oprea

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Document Summary

Develop a theory of firm"s demand for labor. The reasons and effects of something such as minimum wage. A firm employs workers to produce output to sell. The more workers, the more output, and the more revenue. Tradeoff: the more workers, the more costs. Labor markets are complicated (wages, conditions, etc) The competitive assumption: everyone works for same wage. How many to hire? marginal value = demand curve. How many workers should i hire if the wage is ? (2) How many workers should i hire if the wage is ? (3) The extra output produced by an extra unit of labor. The extra revenue that a firm receives from the output produced by an extra unit of labor. If a firm must produce a positive amount of output, it maximizes profit by hiring enough. The marginal value product of last worker hired is at least as large as the wage.

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Related Questions

1. What is the relationship between the labor demand curve under monopoly and perfect competition? Use the necessary formulas and explain.

2.What is the equilibrium condition for finding the optimal number of workers a perfectly competitive firm will hire? a. In the short-run. b. In the long-run.

3.A firm faces a perfectly elastic demand for its output for $6 per unit of output and each hour of labor produces five units of output. For L number of workers hired each hour and w hourly wage rate, the firm faces an upward-sloped labor supply curve of L = 20w - 120 and the firms face an upward-sloped marginal cost of labor curve is given as MC = 6 + 0.1L. How many workers should the firm hire each hour to maximize profits? What wage will the firm pay?

Use the information given in the table below to answer the following question(s). Assume the firm hires labor competitively and sells its product in a competitive price-taker market at a price of $2 per unit.

Units of Labor

Total Output

1

6

2

11

3

15

4

18

5

20

6

21


a) What is the Marginal Revenue Product of the 5th unit of labor?

b) If the market wage is $5 per day, how many workers should the firm employ if it wants to maximize profits?

c) If the market wage rate rose to $7 per day, how many workers should the firm employ if it wants to maximize profits?

Refer to the table below and answer questions A through D.

Labour Output per hour

0            0

1            6

2          11

3          15

4          18

5          19

A. What is the marginal product of labor as the firm moves from using two workers to using three workers?

B. What is the marginal product of labor as the firm moves from using four workers to using five workers?

C. Suppose the price of output is $4 per unit. What is the value of the marginal product of labor as the firm moves from using three workers to using four workers?

D. If this profit-maximizing firm sells its output in a competitive market for $4 per unit and hires labor in a competitive market for $7/hour, then how many workers should this firm hire?