LABOR ECONOMICS (LL+ACCESS)
8th Edition
ISBN: 9781264909339
Author: BORJAS
Publisher: MCG
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Chapter 11, Problem 5P
To determine
Determine the efficiency wage level.
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Consider the following production function:
Currently the wage rate (w) is $5.00 and the price of capital (r) is $5.00.
If the firm is using 20 units of capital in production, how much labor should be employed to minimize costs?
Labor input =
units. (Enter a numeric response using a real number rounded to two decimal places.)
q=100L0.80.4
Consider the following production function:
q= 100L0.8K0.4
Currently the wage rate (w) is $15.00 and the price of capital (r) is $5.00.
If the firm is using 200 units of capital in production, how much labor should be employed to minimize costs?
Labor input=units. (Enter a numeric response using a real number rounded to two decimal places.)
Consider the following production function:
q= 100L0.8K0.4
Currently the wage rate (w) is $15.00 and the price of capital (r) is $5.00.
If the firm is using 200 units of capital in production, how much labor should be employed to minimize costs?
Labor input= units. (Entera numeric response using a real number rounded to two decimal places.)
Chapter 11 Solutions
LABOR ECONOMICS (LL+ACCESS)
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- Suppose a beverage company is profit-maximising. It has one factor of production, which is the amount of labour (l) it hires. For each hour of labour, the firm pays a wage 'w'. The production function is given by f(l) = l^1/2.(Assume that the price is equal to 1).a. Suppose that in equilibrium, the wage rate is fixed at w = 7. Solve for the firm’s optimal choice of how much labour to hire.b. Imagine the government votes to increase the minimum wage to w= 10. What happens to employment in the firm?c. Suppose the firm instead chooses to minimise the cost of producing a specific amount of q. Explain how this helps the firm maximise profits.arrow_forwardMaking dresses is a labor-intensive process. Indeed, the production function of a dressmaking firm is well described by the equation Q = L − L2∕800, where Q denotes the number of dresses per week and L is the number of labor hours per week. The firm’s additional cost of hiring an extra hour of labor is about $20 per hour (wage plus fringe benefits). The firm faces the fixed selling price, P = $40. Over the next two years, labor costs are expected to be unchanged, but dress prices are expected to increase to $50. What effect will this have on the firm’s optimal output? A- Increase B- Decrease C- No Effectarrow_forwardSuppose, the demand and supply curve in a US manufacturing firm are provided as follows: ES = 20 + 2w ED = 70 − 3w where E is the level of employment and w is the hourly wage. Let’s assume this firm shows the representative wage of the manufacturing industry. Suppose the price of each unit of capital used in this industry is $25. The price of output is constant at $50 per unit. The production function is f(E,K) = E½K ½ , so that the marginal product of labor is MPE = (½)(K/E) ½ If the current capital stock is fixed at 1,600 units, how much labor should the industry employ in the short run? How much profit will the industry earn?arrow_forward
- Use the following information to answer the following questions: Mickey L. Douglas, owner of MLD Incorporated, knows that the marginal product of labor (MPL) for his workers can be defined as follows: MPL = 32 - L The total output a given level of workers can produce is found as: Q=32L-1/2 L² He also knows that the price of his output is $3. His profits can be found as: Profit=(PxQ)-(W x L) What wage would be required to allow Mickey to hire the twenty-fifth worker? O $21 O $7 O $125 O $3 $25arrow_forwardAssume in a given company the marginal productivity can be characterized by the following function MPL = 100 - L, where L denotes the number of higher workers.If the price of the good purchased by the company is 10 gel, and the workers wage is set at 600 gel. How many workers should a company hire to achieve the maximum profit? Select one a - 40 b - None c- 99 d- 60arrow_forwardJumbo Enterprises is the sole producer of jumbo jets in the economy. Demand for jets is given by y=2122-201p, where y is the number of jets and p is the price of a jet. The number of jets that Jumbo produces is a function of the number of engineers (N) that it hires. This function is given by y=0.8N. Engineers are hired in a competitive labor market, where the wage is equal to $6. Find Jumbo Enterprise's profit-maximizing choice of N. Answer:arrow_forward
- Given the linear production function: Log (Q) = 1.5 + 0.76 Log (L) + 0.24 Log (K) Where Q is the level of output, L is the units of labor and K is the units of capital employed. a. If one worker's wages are $30 per day, how many workers should the firm employ per unit of output? b. What is the percentage of the firm's revenue spent on labor?arrow_forwardThe Principle of Diminishing Marginal Returns states that adding one more unit of input, say, one worker, will at some point yield more additional output subtracting one more unit of input, say, one worker, will at some point result in an economic downturn adding one more unit of input, say, one worker, will at some point yield less additional output adding one more unit of input, say, one worker, will results in the same amount of additional output as the addition of the previous worker all available answers are correctarrow_forwardA firm produces output according to the production function Q = 4K + 8L where K is capital and L is labour. If the wage rate is €60 and the cost of capital is €20, how many units of capital should the firm hire if it wants to produce 16 units of output? 4 2 0 08arrow_forward
- In this question you will derive a simple labour demand curve. Suppose that the number of calculators a firm can produce per hour (TP) given a certain number of workers (L), is given by: TP = 396 ln(L +17) + 13L The cost of using each worker is just their hourly wage (w). So the total labour cost is C = wL. If the price of each calculator is $11, find the profit maximizing wage as a function of number of workers used (L). W=arrow_forwardTrue or false and explain Suppose a firm’s marginal product of labour is MPL = 10/L, where L is measured in labour hours, the price of the product is $600, and the cost per hour of labour is $30. The firm currently employs 150 labour hours. In order to maximize the firm’s profits in the short run, the manager should increase its labour employment by 40 labour hours.arrow_forwardQUESTION ONESuppose a firm’s production function is given by Y = 4L0.5 and its (inverse) product demand curve is P = 20 −0.5Y. The firm can hire labour at a wage rate of K12. a) Find an expression for the marginal product of labour. b) How many workers will the firm hire? c) What level of output does the firm produce? and What price will it charge?arrow_forward
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