a) Are competitive firms wage makers or wage takers in their hiring decision? Why? (25pts) b) A perfectly competitive firm compares what two components in their hiring decision? (25pts) c) What is the condition for a competitive firm’s hiring decision? (25pts) d) A competitive farm is thinking about bringing on additional farmer to grow crops but has identified with their current tools that the additional farmer would not be able to generate more revenue from their work than what they are asking for their wage rate. With this information in mind would the farm hire the additional farmer? Why or why not? (25pts)
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**a) Are competitive firms wage makers or wage takers in their hiring decision? Why? (25pts)** Show more…
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KEY QUESTION At the bottom of the page, complete the labor demand table for a firm that is hiring labor competitively and selling its product in a competitive market. LO2 a. How many workers will the firm hire if the market wage rate is $$ 27.95 ?$$ S19.95? Fxplain why the firm will not hire a larger or smaller number of units of labor at each of these wage rates. b. Show in schedule form and graphically the labor demand curve of this firm. c. Now again determine the firm's demand curve for labor, assuming that it is selling in an imperfectly competitive market and that, although it can sell 17 units at $$ 2.20$$ per unit, it must lower product price by 5 cents in order to sell the marginal product of each successive labor unit. Compare this demand curve with that derived in question $2 b .$ Which curve is more elastic? Explain.
Leadbelly Co. sells pencils in a perfectly competitive product market and hires workers in a perfectly competitive labor market. Assume that the market wage rate for workers is \$150 per day. a. What rule should Leadbelly follow to hire the profit-maximizing amount of labor? b. At the profit-maximizing level of output, the marginal product of the last worker hired is 30 boxes of pencils per day. Calculate the price of a box of pencils. c. Draw a diagram of the labor market for pencil workers (as in Figure 4 of this chapter) next to a diagram of the labor supply and demand for Leadbelly Co. (as in Figure 3). Label the equilibrium wage and quantity of labor for both the market and the firm. How are these diagrams related? d. Suppose some pencil workers switch to jobs in the growing computer industry. On the side-by-side diagrams from part (c), show how this change affects the equilibrium wage and quantity of labor for both the pencil market and for Leadbelly. How does this change affect the marginal product of labor at Leadbelly?
[5 pts. each] According to the neoclassical theory of distribution, the real wage earned by any worker equals that worker’s marginal productivity. Let’s use this insight to examine the incomes of two groups of workers: farmers and barbers. [a] Over the past century, the productivity of farmers has risen substantially because of technological progress. According to the neoclassical theory, what should have happened to their real wage? [b] In what units is the real wage discussed in part [a] measured? [c] Over the past period, the productivity of barbers has remained constant. What should have happened to their real wage? [d] In what units is the real wage discussed in part [c] measured? [e] Suppose workers can move freely between being farmers and being barbers. What does this mobility imply for the NOMINAL wages of farmers and barbers? [f] What do your previous answers imply for the price of haircuts relative to the price of food? [g] Who benefits from technological progress in farming–farmers or barbers?
Crystal W.
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