a)
The market structure of the factor market in which the firm hires labor.
a)
Explanation of Solution
The firm will employ labor in a market structure of a
Introduction: When different industries are classified according to the degree or nature of competition for the product, they come under the market structure such as perfect competition,
b)
The market structure of the product market in which the firm sells its goods.
b)
Explanation of Solution
This will be a perfectly competitive product market where the firm sells its goods because all firms in this market relate to similar products. And, from the horizontal demand curve, it is clear that the firm is a price-taker in the product market. Therefore, the firm is ready to sell all of its quantity of output at the price of $5 according to the graph.
Introduction: When different industries are classified according to the degree or nature of competition for the product, they come under the market structure such as perfect competition, monopoly, etc.
c)
The marginal factor cost definition and the marginal factor cost of labor for this firm.
c)
Explanation of Solution
The marginal factor cost refers to the increase in total cost which is paid for by the factor of production by increasing one extra unit of factor. For example, in this case, labor is a factor of production, and an increase in one unit of labor will increase the total cost of the firm and this increase in cost is the marginal factor cost.
As the firm is paying a fixed wage of $80 per day to every worker by hiring workers as many as it wants, it means the marginal factor cost of the firm is $0.
Introduction: When different industries are classified according to the degree or nature of competition for the product, they come under the market structure such as perfect competition, monopoly, etc.
d)
The last worker’s MRPL if the last hired worker produces an additional 20 units of output.
d)
Explanation of Solution
If the last hired worker produces an additional 20 units of output for the firm, then the last worker’s MRPL would be:
MPL = 20
MR (price) = $5
Therefore, the last worker’s MRPL would be $100 when the last hired worker produces an additional 20 units of output.
Introduction: When different industries are classified according to the degree or nature of competition for the product then, they come under the market structure such as perfect competition, monopoly, etc.
Chapter 71 Solutions
Krugman's Economics For The Ap® Course
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