Explain why the outcome might not be pairwise efficient

Assignment Help Microeconomics

Reference no: EM132139564

Question: Suppose a firm has a labor demand curve given by w = 20 - 0.01E. Furthermore, suppose that the union representing workers in the firm derives utility from the wage rate and the level of employment according to the utility function U = w · E where the marginal utility of an increase in the wage is MUw = E and the marginal utility of an increase in employment is MUE = w.

a) Graphically represent the union's utility-maximization problem, as well as its optimal wage-employment choice.

b) Algebraically solve for the union's optimal wage-employment choice.

c) Intuitively, explain why this outcome might not be "pairwise efficient".

Reference no: EM132139564

Questions Cloud

What is the standard deviation of this distribution : For planning purposes, truss manufacturers must try to predict the number of hurricanes that will hit the eastern seaboard of the United States in any given

Which cd does yield the higher interest : Suppose you are considering investing $1,000 in one of the following bank CDs (certificate of deposit). Which CD does yield the higher interest?

Considering buying a fourth feller buncher to offset : The contractor is considering buying a fourth feller buncher to offset the possibility of none of the machines operating.

Who were the primary combatants : When and where did the war(s) take place? What were the primary objectives of the war(s)?

Explain why the outcome might not be pairwise efficient : Suppose a firm has a labor demand curve given by w = 20 - 0.01E. Furthermore, suppose that the union representing workers in the firm derives utility.

What is the total cost of the firm : Suppose that the table presented below represents production and cost data from a single firm. The table displays the level of labor (L) and capital (K) chosen.

Which bond has the highest expected return : Suppose two bonds (Apple Inc. and Samsung Electronics Co., Lid) are traded in the bond market and Ms. Wilson needs your advice on which one to buy.

Calculate the marginal rate of substitution : Suppose the utility function for a consumer is given by U = 5XY. X is the amount of Good X and Y is the amount of Good Y.

Sketch indifference curves for the consumer : Suppose the utility function for a consumer is given by U = min{X, 3Y}. Sketch 3 indifference curves for this consumer.

User Account

All Pages