determine the wage rate , Managerial Economics

Assignment Help:

Northern Lumber operates a large lumber-processing mill in a small town in Washington State.  It is one of the larger lumber producers in the region and has some market power in the sale of that product.  A recent consulting study has indicated that the price elasticity of demand for the firm's product is about -3.0.  Also, Northern is the dominant employer in the local labor market, and effectively can be considered as a monopsonist in the purchase of labor.  The firm's labor demand (i.e. marginal revenue product) function is;
      MRP = 1 000 - 2L

where L is the number of workers.  Because of its size relative to the labor supply in the area, Northern faces an upward sloping labor supply function,
      w = 50 + 0.025L and ME = 50 + 0.050L

where w is the daily wage rate and ME is the marginal expenditure on labor.

Once the firm determines the optimal rate of labor input and the wage rate, the rate of output is determined.  The firm uses a cost-plus pricing formula that includes the price elasticity of demand as a determinant in setting product price.  The same study indicated that average cost is about RM300 per unit (1 000 board feet) of lumber.

Requirements

1.    Determine the amount of labor that the firm should employ in order to maximize profit.

2.    Determine the wage rate the firm will have to pay.

3.    What price will the firm charge per unit of output?


Related Discussions:- determine the wage rate

Pilgrim Bank Case, Your discussion assignment this week is associated with ...

Your discussion assignment this week is associated with the Pilgrim Bank case. Using the attached file, answer the following questions: A. Is there a difference in profitability ac

Disadvantages of barter trade, Disadvantages of Barter Trade It is...

Disadvantages of Barter Trade It is impossible to barter unless A has what B wants, and A wants what B has. This is called double coincidence of wants and is difficult t

Give brief description about economics, Economics is generally defined as t...

Economics is generally defined as the problem of how best to allocate limited resources, limited because needs are characterized as unlimited, but common sense tells us that rather

What are the forecasting techniques, Write the forecasting techniques ...

Write the forecasting techniques There are many forecasting techniques available to person assisting the business in planning its sales. Take for instance a forecasting metho

ECONOMIC THEORY, How does economic theory contribute to managerial decision...

How does economic theory contribute to managerial decisions?

Explain the no new substitutes for the commodity, No new substitutes for th...

No new substitutes for the commodity If some new substitutes for a commodity appear in the market, its demand normally declines. This is quite natural, since with the availabil

Projection method of demand forecasting, Explain trend projection method of...

Explain trend projection method of demand forecasting with illustration.

Advertising budget, Analyse The Method By Which a Firm Can Allocate The Giv...

Analyse The Method By Which a Firm Can Allocate The Given Advertising Budget Between Different Media Of Advertisement

Profession, list all profession which generate personal income

list all profession which generate personal income

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd