Pure Competition

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ANSWERS TO END-OF-CHAPTER QUESTIONS 3,4, 7 AND 8 WERE HOMEWORK QUESTIONS 122 (Key Question) Complete the following labor demand table for a firm that is hiring labor competitively and selling its product in a competitive market. | | | | | | Unitsoflabor | Totalproduct | Marginalproduct | Productprice | Totalrevenue | Marginalrevenueproduct | | | | | | | | | | | | | | | | | | | | | 0123456 | 0173143536065 | | ____________________________ | $2222222 | | $____________________________ | | $________________________ | | a. How many workers will the firm hire if the going wage rate is $27.95? $19.95? Explain why the firm will not hire a larger or smaller number of units of labor at each…show more content…
(b) Output is 142 (= 96 from capital + 46 from labor). Economic profit is $114 (= $142 - $28). Yes, least-cost production is part of maximizing profits. The profit-maximizing rule includes the least-cost rule. 127 (Key Question) In each of the following four cases, MRPL and MRPC refer to the marginal revenue products of labor and capital, respectively, and PL and PC refer to their prices. Indicate in each case whether the conditions are consistent with maximum profits for the firm. If not, state which resource(s) should be used in larger amounts and which resource(s) should be used in smaller amounts. a. b. c. d. (a) Use more of both; (b) Use less labor and more capital; (c) Maximum profits obtained; (d) Use less of both. 12-8 Florida citrus growers say that the recent crackdown on illegal immigration is increasing the market wage rates necessary to get their oranges picked. Some are turning to $100,000 to $300,000 mechanical harvesters known as “trunk, shake, and catch” pickers, which vigorously shake oranges from trees. If widely adopted, what will be the effect on the demand for human orange pickers? What does that imply about the relative strengths of the substitution and output effects? The effect of the adoption of the mechanical pickers will be to decrease the demand for human pickers. If this occurs, the substitution
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