Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 17, Problem 3RQ
To determine
Whether the given statement is true or false.
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The marginal expenditure of a
monopsonist is $9. The wage it
currently pays is $3. The labor supply
curve has a constant elasticity. What
is the elasticity of the labor supply? *
O 3
O 1
0.33
0.5
Your answer to the previous question can be explained by the differences in the Marginal Cost and
Average Total Cost faced by a monopsony vs a perfectly competitive firm.
A monopsony's Marginal Cost curve shifts upward, compared to a perfectly competitive firm.
A monopsony's ATC curve shifts down and left, compared to a perfectly competitive firm.
Why is that the case?
O Higher MC curve: A perfectly competitive firm faces an increasing wage. A monopsonist faces a decreasing wage
as labor increases
Lower ATC curve: By restricting the quantity of labor employed, a monopsonist can lower its average total cost,
and earn positive profits
O Higher MC curve: A perfectly competitive firm faces a constant wage. A monopsonist has to pay a higher wage as
it hires less labor
Lower ATC curve: By increasing the quantity of labor employed, a monopsonist can lower its average total cost,
and earn positive profits
Higher MC curve: A perfectly competitive firm faces a higher price on inputs, and a…
Suppose that low-skilled workers employed in clearing woodland can each clear one acre per month if each is equipped with a shovel, a machete, and a chainsaw. Clearing one acre brings in $1,000 in revenue. Each worker’s equipment costs the worker’s employer $150 per month to rent and each worker toils 40 hours per week for four weeks each month. LO17.6
Now consider the employer’s total costs. These include the equipment costs as well as a normal profit of $50 per acre. If the firm pays workers the minimum wage of $6.20 per hour, what will the firm’s economic profit or loss be per acre?
At what value would the minimum wage have to be set so that the firm would make zero economic profit from employing an additional low-skilled worker to clear woodland?
Chapter 17 Solutions
Economics (Irwin Economics)
Ch. 17.3 - Prob. 1QQCh. 17.3 - Prob. 2QQCh. 17.3 - Prob. 3QQCh. 17.3 - Prob. 4QQCh. 17.A - Prob. 1ADQCh. 17.A - Prob. 2ADQCh. 17.A - Prob. 3ADQCh. 17.A - Prob. 4ADQCh. 17.A - Prob. 5ADQCh. 17.A - Prob. 1ARQ
Ch. 17.A - Prob. 2ARQCh. 17.A - Prob. 3ARQCh. 17.A - Prob. 4ARQCh. 17.A - Prob. 1APCh. 17.A - Prob. 2APCh. 17 - Prob. 1DQCh. 17 - Prob. 2DQCh. 17 - Prob. 3DQCh. 17 - Prob. 4DQCh. 17 - Prob. 5DQCh. 17 - Prob. 6DQCh. 17 - Prob. 7DQCh. 17 - Prob. 8DQCh. 17 - Prob. 9DQCh. 17 - Prob. 10DQCh. 17 - Prob. 1RQCh. 17 - Prob. 2RQCh. 17 - Prob. 3RQCh. 17 - Prob. 4RQCh. 17 - Prob. 5RQCh. 17 - Prob. 6RQCh. 17 - Prob. 7RQCh. 17 - Prob. 1PCh. 17 - Prob. 2PCh. 17 - Prob. 3PCh. 17 - Prob. 4PCh. 17 - Prob. 5P
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- 4. Inclusive, or industrial, unions - Negotiating a higher industry wage Consider the housing construction industry. Assume that the industry is perfectly competitive in both input and output markets. Suppose that, through collective bargaining, a labor union negotiates an industry-wide wage for various kinds of labor (electricians, plumbers, and so on). In particular, it succeeds in negotiating a wage increase for carpenters from $9 to $12 per hour. The following graph shows the labor demand of an individual firm. On the following graph, show what happens at the firm level as a result of the union negotiations. 18 15 Demand 12 Supply Supply Demand 3 10 15 20 25 30 QUANTITY OF LABOR ---- --- Co WAGE RATEarrow_forwardComplete the following labor supply table for a firm hiring labor competitively: LO17.2 Show graphically the labor supply and marginal resource (labor) cost curves for this firm. Are the curves the same or different? If they are different, which one is higher? Plot the labor demand data of review question 2 in Chapter 16 on the graph used in part a above. What are the equilibrium wage rate and level of employment?arrow_forwardWhich statement is false regarding unions? O a) With unions successfully raising wages for workers, it can also reduce overall employment. b) When unions drive up wages for workers, it results in an incentive for firms to hire more workers. OC) Unions drive up wages and benefits for workers by asserting market power over employers. O d) It is possible that raising wages for union workers can lead to higher productivity than nonunion workers because union workers are more likely to stay on the job longer.arrow_forward
- In the figure to the right, suppose that We is a wage rate of $28 per hour and W₁ is a wage rate of $39 per hour. In addition, Quis 12,000 workers per hour, Q is 16,000 workers per hour, and Q is 21,000 workers per hour. How much more or less do the firms in this industry spend, in total, on the labor employed each hour as a consequence of establishment of the union wage W₁ above the equilibrium wage W? Firms spend a total of $ per hour response as a whole number.) on unionized labor. (Enter your C Wage Rate ($ per hour) Wu We A B S Quantity of Labor per time periodarrow_forwardSuppose that the wage rate is $13 per hour and the price of the product is $2. Values for output and labor are in units per hour. b. L 0. 24 44 60 72 80 4 84 Find the profit-maximizing quantity of labor. (Assume the firm can hire up to 6 workers.) The profit-maximizing quantity of labor is worker(s). (Enter a numeric response using an integer.) Suppose that the price of the product remains $2 but that the wage rate increases to $36. Find the new profit maximizing level of L The profit-maximizing quantity of labor is worker(s). Suppose that the price of the product decreases to $1 and the wage remains at $13 per hour. Find the new profit-maximizing L.arrow_forward3) Suppose that the supply curve for the labour to a firm is given by L = 100W and the marginal expense of labour curve is given by MEL = L/50 where W is the (nominal) market wage. Suppose also that the firm’s demand for labour (marginal revenue product) curve is given by L = 1, 000 − 100MRPL. a) If the firm acts as a monopsonist, how many workers will it hire in order to maximise profits? What wage will it pay? How will this wage compare to the MRPL at this employment level? b) Assume now that the firm must hire its workers in a perfectly competitive labour market. How many workers will the firm hire now? What wage will it pay? c) What is the deadweight loss from the labour market for a monopsonist? Graph your results and show the DW Larrow_forward
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