Asked by Sophie Hansen on May 30, 2024
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Edna has a monopoly in the sale of engineering services in the local market. Also, Edna is the only employer of high skilled labor in the local market. The marginal product of labor is: (L) = 250.
The marginal revenue of engineering services is:
MR(L) = 12,000 - 0.25L
The local supply of high skilled labor is:
LS (w) = 200w - 10,000
Or equivalently
w = 50 + 0.005LS
This implies Edna's marginal high-skill labor wage bill expenditures is:
ME(L) = 50 + 0.01L
Determine Edna's optimal level of employment. Also, what is the wage rate Edna pays for a unit of high skilled labor? What is the marginal revenue of the product of labor at the optimal employment level? Suppose Edna acted as a wage taker in determining high-skilled labor employment. How much labor would she hire and at what wage rate? At this level of employment, calculate the marginal revenue of the product of labor.
Marginal Product
The additional output resulting from using one more unit of a production input, keeping all other inputs constant.
Marginal Revenue
The supplementary income generated from the sale of an extra unit of a good or service.
High Skilled Labor
High Skilled Labor refers to jobs that require advanced knowledge or abilities, often gained through extensive education or specific training, and typically command higher wages.
- Assess the perfect amount of labor hiring by analyzing the marginal product of labor, wage levels, and marginal revenue.
- Analyze the connection between marginal revenue product, compensation levels, and the number of employed in monopoly scenarios.
- Understand the relationship among labor supply, wage expenses, and marginal cost functions in deciding the best employment level for labor.
Verified Answer
Learning Objectives
- Assess the perfect amount of labor hiring by analyzing the marginal product of labor, wage levels, and marginal revenue.
- Analyze the connection between marginal revenue product, compensation levels, and the number of employed in monopoly scenarios.
- Understand the relationship among labor supply, wage expenses, and marginal cost functions in deciding the best employment level for labor.
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