Answered: a. Can leisure be considered a normal…

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

See similar textbooks

Related questions

Question

Transcribed Image Text:The Jarvis Brand is an international robotic parts manufacturing company supplying key components for Als. The labour market has no restrictions on the entry and exit of suppliers and the goods and services are identical. Jarvis labour supply is given by Supply: L = w - 2, where w is the wage per hour worked and L is the number of employees in thousands. The marginal product of labour is given by MP₂ = 10 - 0.5L. The market for robotic parts is in equilibrium and the price of a chocolate is $2. Based on the information provided answer the following questions: a. Can leisure be considered a normal good? Explain your answer. b. Find the wage where demand and supply would intercept. c. From you answer in b, what is the level of employment. c. From your answer in b, what is the level of unemployment? d. From your answer in b, is the market outcome inefficient or efficient? Explain why or why not. e. The demand for robotic parts goes up. Briefly describe in words how does this change in the market for donuts affect the underlying labour market (i.e. equilibrium wage, employment and unemployment)? f. From your answer in e, demonstrate it diagrammatically (i). the markets for robotics parts; (ii). the market for robotic parts' workers. g. Consider that robotics parts manufacturing market is actually composed of a single employer (monopsony). However, consider that the labour and demand are still the same as in part (f), which yields the following marginal cost of labour: MC₁ = 2L + 2. From the information provided, draw the demand, supply, and marginal cost of Labour in such a case. h. From your answer in (g), give an explanation why the marginal cost of labour is higher than the supply of labour?

i. From question part g, Find the:
(a). monopsony wage Wm and label it on the graph in part (g)
(b). level of employment Lm and label it on the graph in part (g)
j. It has been noted that the workers' wage is too low under the monopsony, the government is
considering imposing a minimum wage at w = 10. With the minimum wage, what would be the:
(a). employment level
(b). unemployment level?
k. From your answer in part (j), would the minimum wage make workers better off (compared to
part (i)).
1. Seeing the government imposition of the minimum wage, the representative for workers of
robotic parts manufacturing says: "although I am happy with the minimum wage, in monopsony
workers always benefit from an increase in the minimum wage". Do you agree or disagree with
the statement? Why or why not?

Expert Solution

Step by step

Solved in 11 steps with 29 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions