Specific monopolist, Microeconomics

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Specific Monopolist:

  1. Suppose a monopolist firm, I-Tech, pays $500,000 in short-run costs for its capital and unskilled labor. Its only short-run decision, therefore, is to determine how many high-skilled workers, E, to hire.  I-Tech's production function is Q = f(E) = 100E.  I-Tech also faces a downward sloped demand for its output of Q = 12000 - 20p.  What is the equation for I-Tech's short-run labor demand curve?
  2. If the wage in a competitive labor market is $20,000, then what is the labor (E) demanded by I-Tech?
  3. If I-Tech adopted new production technology such that the production function became Q = f(E) = 250E, how many workers would they demand at the competitive wage of $20,000?

2.    Question on Graphing the Labor Supply Decision

a.    Graph a decrease in the wage when leisure is a normal good and the labor supply curve has a positive slope.

b.    Graph an increase in the wage when leisure is a normal good and the labor supply curve has a negative slope.

c.    Graph a decrease in the wage when leisure is an inferior good and the labor supply curve has a positive slope.


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