problemset3

# problemset3 - EC151A, Problem Set 3, Page 1 UC Davis,...

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EC151A, Problem Set 3, Page 1 UC Davis, Department of Economics Economics 151A Fall 2006 Professor Doug Miller Problem Set #3 Due in Lecture, Tuesday, November 28 th 1. True/False/Uncertain/Explain For each of the propositions given, state whether the proposition is true, false, or uncertain. You MUST support your answer with an explanation. Use 1-3 concise sentences. A. In a competitive market, minimum wages reduce unemployment. B. In a regression analysis of labor supply on wages, if the coefficient on wages is statistically significant, then we know that wages have a large impact on labor supply. 2 Suppose employer A and employer B have the same production technology, and sell their output in the same competitive market. Employer A is a monopsonist in her labor market, but employer B hires her labor in a competitive labor market. Which employer's hiring decisions (if any) will be more responsive to changes in the price of the output good? Explain why. 3. Alaska Salmon Co. faces perfectly elastic demand for salmon fillets at a price of \$4/fillet. The labor supply curve is upward sloping: Ls = 10w-100 a. Derive the marginal Cost of labor curve. b. Each hour of labor produces 20 salmon fillets. There are no other costs to worry about. How much labor will be hired? How many fillets will be produced? What wage will the company pay? 4. Homer Moose Nugget Jewelry Inc. is a monopolist for the sale of its special type of jewelry. The inverse demand for jewelry is: P = 10 - .1 Q where P is the price of jewelry and Q is the amount sold per day. The company is also a monsopnist in the labor market. It faces an inverse labor supply curve of:

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## This note was uploaded on 04/21/2008 for the course ECON 151A taught by Professor Miller during the Fall '06 term at UC Davis.

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problemset3 - EC151A, Problem Set 3, Page 1 UC Davis,...

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