Monopsony and the minimum wage

Assignment Help Business Economics

Reference no: EM13983934

Monopsony and the Minimum Wage. A monopsonist firm operates according to the production function: Y = L where L is labor. Workers supply labor to the firm according to the following labor supply function: L = (alpha)(w)

1. Write down the full the profit function for the firm. Remember that the firm takes into account the labor supply on the wage (or alternatively the wage on labor supply).

2. Solve for the firm’s choice of employment and the resulting wage.

3. Solve for firm profits.

4. Now the government sets a minimum wage of w = (3p/4) where p is the price of firm output. Set up the Lagrangian for profit maximization.

5. What is employment at the minimum wage. Compare your results to employment without the minimum wage? Explain your results.

Reference no: EM13983934

Questions Cloud

What is the optimal action for the agent : Insurance Consider a risk avers agent who owns an asset worth 100 USD. The agent can choose one of two actions: being cautious a1 or being negligent (a0). The agent’s payoff from having wealth w and taking action a is given by u(w_1,a_0 )=√x and u(w_..

Consider a monopoly with a production function : Consider a monopoly with a production function given by q = f(x) = √x and a fixed cost of $1. The input price is $0.50. The monopolist sells her product in a market that has ten consumers. Let p denote the unit price of the good. Find the profit-maxi..

Two monopolies in different markets have identical : Two monopolies in different markets have identical, constant marginal cost functions. (a) Suppose each faces a linear demand and the two demands are parallel. Which monopolist will have a higher Lerner index: the one whose demand is closer to the ori..

Equilibrium price-quantity-number of firms-output per firm : Consider an industry in which all firms have identical technology given by a production function: q = min K α , L 1 − α 1/2 , where q is the level of output, α is some constant between 0 and 1, and K and L are two inputs. Describe the long-run equil..

Monopsony and the minimum wage : Monopsony and the Minimum Wage. A monopsonist firm operates according to the production function: Y = L where L is labor. Workers supply labor to the firm according to the following labor supply function: L = (alpha)(w). Write down the full the profi..

Describe short-run equilibrium by giving-equilibrium price : Consider a competitive industry in which each firm has the same production technology given by the production function q = K1/3L2/3, where K and L are two inputs and q is the amount of output. The unit price of K is $0.50 and the unit price of L is $..

What does the production possibilities curve represent : What does the production possibilities curve represent? discuss the implications. what are the factors of productions? What is the difference between the current account and the capital account, what is included in each calculation? are these account..

Firms produce a homogeneous product : Consider an industry in which n firms produce a homogeneous product. Demand for the product is given by p = a − Q, where a is a positive constant and Q is the industry output. Each producer is identical, having a constant marginal cost c. Find the eq..

Performance-based payment : Performance-based payment, as incorporated in the Affordable Care Act, may encourage hospitals to increase staffing of which of the following professions

User Account

All Pages