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Most industrial farms hire migrant workers, so the market for such workers is reasonably taken to be perfectly competitive. Suppose that all farms individually have a short-run elasticity of labor demand of

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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?

(a) State whether the following statements are true or false. Briefly explain your answers.

(i) The gap between average total cost (ATC) and average variable cost (AVC) becomes larger when output increases.

(ii) Marginal cost curve cuts the lowest point of the average cost curve.

(b) Suppose carrots are bought and sold on a competitive market. Assume that the market is in equilibrium and that the economic profits of existing farms are zero. If the price of cabbage (a close substitute of carrot) drops,

(i) discuss the short-run effects on the market and individual farms of carrots in terms of price, quantity and profits.

(ii) what will be the long-run effects on the market and individual farms of carrots in terms of price, quantity and profits?


3. (24 points) Suppose a competitive firm can sell its output for$5 per unit. The following table gives the firm's short-run production function.

Labor Output
0 0
1 60
2 130
3 180
4 220
5 250
6 260

In the table below, you will determine several points on the firm's demand curve for labor. To do this, you must determine how many workers the firm should hire for different wage rate values to maximize profit. Complete the table below:


Wage Rate Per Worker Quantity Demanded of Workers
$45?
$75
$225
$270
$320
$340

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