LABOR ECONOMICS LOOSE PRINT UPGRADE
20th Edition
ISBN: 9781264115211
Author: BORJAS
Publisher: MCG
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Chapter 4, Problem 2RQ
To determine
The implications of equilibrium for a competitive economy containing many regional markets.
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Discuss: “The equilibrium output is an efficient allocation of resources. Hence laissez-faire is the best policy”.
6. Q) The market demand for the output is P = 80 – Q, where Q is the output level and P is the price per unit of output. A firm’s production function is Q = 0.5L, where Q is the output level, and L is the amount of labor. If the labor supply function is PL = 10 + 0.5L, what is the price of labor at the competitive equilibrium in the labor market?
Question 71 options:
$20
$25
$30
$40
None of the above.
The nation of Ectenia has 20 competitive apple orchards, all of which sell apples at the world price of $2 per apple. The following equations describe the production function and the marginal product of labor in each orchard:
Q=100 L-L2
MPL = 100-2L
Where Q is the number of apples produced in a day, L is the number of workers, and MPL is the marginal product of labor
a. What is each orchard's labor demand as a function of the daily wage W? What is the market's labor demand?
b.Ectenia has 200 workers who suply their labor inelastically. Solve for the wage W How many workers does each orchard hire ? How much profit does each orchard owner make?
c.Calculate what happens to the income of workers and orchard owners if the world price doubles to $4per apple.
d. Now suppose the price is back at $2 per apple, but a hurricane destroys half the orchards. Calculate how the hurricane affects the income of each worker and of each remaining orchard owner. What happens to the income of Ectenia as a…
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LABOR ECONOMICS LOOSE PRINT UPGRADE
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