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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 market wage. Suppose also that the firms 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 Deadweight loss.
Jack sees commuting by bus and train as perfect substitutes (U = B + T), that is, he would exchange one commute by bus for one commute by train. The price of a bus ticket is $1.50 and the price of a train ticket is $ 2.00. Jack has $6.00 to spend on ..
Explain how would Margaret's indifference map look like. What is the Marginal Rate of Substitution (MRSA,B) between good A and B.
Tammy was shopping in Save-a-Lot Grocery Store when Stewart, an employee, brushed Tammy’s ankle with a grocery cart. A short time later, while still shopping, Tammy told Stewart that he should say “Excuse me,” and then people would get out of his way..
What do Card and Krueger find regarding the effects of increasing the minimum wage on employment? What is a possible problem with the study? Tell me an economic story that would explain their results.
In a two–player, one shot simultaneous – move game each player can choose strategy A or strategy B. If both players choose strategy A, each earns a payoff of $500. If both players choose strategy B, each earns a payoff of $100. If player one chooses ..
Suppose that the average cost of producing product X is constant and equal to the marginal cost which is $120. The demand for X is given by Qd = 2700 – 10P Now suppose the government imposes a $30 per unit tax on X. What is the price received by sell..
Discuss the debate over whether the expansionary monetary or fiscal policy would have successfully pulled the U.S. economy out of the Great Depression. Discuss the changes in federal tax policies during the Great Depression. Explain their impacts ..
An economy has the following Cobb-Douglas production function: F(K,L) = K^1/6 (EL)^5/6. The depreciation rate is 1% and the saving rate is 48%. The economy is in a steady state, where the population decreases at a rate 1%, while real GDP per capita g..
Which of these outcomes would we NOT expect from a government-supported cartel, as compared to a competitive market?
Nominal interest rates are quoted at a variety of maturities, corresponding to different lengths of loans. For example, in late 2004 the U.S. government could take out ten year loans at an annual interest rate of a bit over 4 percent, whereas the ann..
According to Classical economists, which type of fiscal policy financing produces "crowding out?"
What is the federal funds rate? Why is it a vital component of macroeconomics? How does the Federal Reserve influence the federal funds rate? Graphically illustrate the impact of an FOMC open market operation that aims to reduce the federal funds rat..
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