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Unformatted text preview: Econ 101 Prof.Schuler Spring 2008 Problem Set 6 Due in Lecture on Monday, April 28,2008 Q.1 (c) How would your analysis and picture change if phil had a monopoly on the sale of Tofu? (d)What can you say about the exploitation of labor by Phil in the case where 1) the tofu market is perfectly competitive and 2) where Phil is a monopolist in the production of Tofu? Q.2 Suppose Ithaca Co. is the only firm that hires workers in Ithaca, NY (also assume that Ithaca Co. is a monopolist in the output market). Ithaca Co. has known that the labor supply (or average expenditure curve) it faces is W(L) = L where W is the wage rate and L is the amount of labor hired. With the help of a Cornell professor, Ithaca Co. has calculated that its marginal revenue product is MRP(L) = 9 - L and its marginal expenditure curve is ME(L) = 2L. a. Explain why the labor supply curve, W(L), can be interpreted as an average expenditure curve. b. How much labor would Ithaca Co. hire and at what wage rate? c. If Ithaca Co. behaves as a competitor in the labor market, how much labor would they hire and at what wage rate?...
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