Answer true or false d) When government support prices exceed levels at which supply and demand are inequilibrium, surpluses of the price-supported agricultural commodities occure) A farmer decides to diversify farm production by growing avocado fruit and keeping dairycattle as a mechanism to deal with price and income variability. For this to be effective thetwo farm activities must have prices and outputs that move opposite to each other.f) If landowners possess monopsony power in agricultural labour markets, due to unequaldistribution of landownership, a defective land tenure system, and privileged access to the capitalmarket, the result will be lower wages and less employment than would otherwise be the case.

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When government support prices exceed levels at which supply and demand are in equilibrium, surpluses of the price-supported agricultural commodities occur

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.4P

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Consider the labour market for farms during the harvest season. Assume the market is perfectly competitive, with a labour demand function QD = 10-P and a labour supply function QS = 3P, where P is the wage. a) What are the consumer (farm owners) surplus and producer (farm workers) surplus in equilibrium? b) What is the price elasticity of demand at the equilibrium? c) Suppose the government subsides the farm owners (consumers) $1 for every unit of labour purchased. Then, compute the quantity of labour traded in the market, the wage received by the workers and the wage paid by the farm owners. d) Calculate the consumer surplus and producer surplus in the presence of the subsidy in part c).
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