3) Jack's Labor Demand Problem Jack hires craftswomen like Jane to help produce widgets. Jack acts like a price-taker in the widget (output) market. His production function is as follows Q = ZOL2 T-BQ - WL-rK ニらo-2-16 Q = F(K,L) = 4(KxL) – Ľ In the short-run, Jack's capital is fixed at 5 units (K = 5). In the long-run, he cán acquire more capital by paying r for each unit of additional capital. Given a price of p for his t widgets, Jack's short-run profit maximization problem can be written as レ max 7=PxF(K, L) –[wL + rK] (rentalvateof apilal) = P x [4 (5 x L) – L2 ] - [ wL + 5r] Assume for now that Jack is a price-taker in the labor market as well. The going wage is w = $10, price for widgets P = 5, and factor price for capitál r= 15 (3a) What is Jack's short-run marginal product of labor? What is Jack's short-run marginal revenue? (3b) What is Jack's short-run marginal revenue product of labor? (3c) Given that Jack is a price-taker in the labor market, how much labor would Jack buy given the prevailing prices. How much widgets does Jack make? What is Jack's profit? OPTIONAL: Although Jack acts as a price taker, is the widget market competitive for this example? Look at Jack's profit. At the going price of widgets, is P = MC?
3) Jack's Labor Demand Problem Jack hires craftswomen like Jane to help produce widgets. Jack acts like a price-taker in the widget (output) market. His production function is as follows Q = ZOL2 T-BQ - WL-rK ニらo-2-16 Q = F(K,L) = 4(KxL) – Ľ In the short-run, Jack's capital is fixed at 5 units (K = 5). In the long-run, he cán acquire more capital by paying r for each unit of additional capital. Given a price of p for his t widgets, Jack's short-run profit maximization problem can be written as レ max 7=PxF(K, L) –[wL + rK] (rentalvateof apilal) = P x [4 (5 x L) – L2 ] - [ wL + 5r] Assume for now that Jack is a price-taker in the labor market as well. The going wage is w = $10, price for widgets P = 5, and factor price for capitál r= 15 (3a) What is Jack's short-run marginal product of labor? What is Jack's short-run marginal revenue? (3b) What is Jack's short-run marginal revenue product of labor? (3c) Given that Jack is a price-taker in the labor market, how much labor would Jack buy given the prevailing prices. How much widgets does Jack make? What is Jack's profit? OPTIONAL: Although Jack acts as a price taker, is the widget market competitive for this example? Look at Jack's profit. At the going price of widgets, is P = MC?
Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN:9781305971493
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter18: The Markets For The Factor Of Production
Section: Chapter Questions
Problem 3PA
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