laborps4 - 3 Acme Dynamite Company is the sole employer of...

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Economics 421 Spring 2004 Lich-Tyler Problem Set 4 ( Due 5/17 ) 1. Suppose that a firm s technology is such that it must put 6 workers at each of 10 machines. This means that its short-run labor demand elasticity is zero. Which of Marshall s laws of derived demand support this idea? 2. In the competitive labor market of the small town of Cloneville, there are 100 workers and 10 firms. Each worker s preferences are given by the utility function U ! C , L " = ln C + ln L . They all have 100 waking hours in the week, and each has unearned income of $50 per week. Each firm has the same production, Q = 15 ! ln E + 5 ! ln K , and each sells its output at a price of $4. a. Find the " aggregate # labor supply curve, as a function of $ W. b. Find the " aggregate # labor demand curve, as a function of $ W . c. Find the market equilibrium.
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Unformatted text preview: 3. Acme Dynamite Company is the sole employer of labor in the town of Nitro, West Virginia. The number of hours that locals who are willing to work at the plant is H = 10 W , where $ W is the hourly wage rate. The amount of dynamite that the firm produces is Q = 100 E ! E 2 , where E is the amount of labor employed. Find the amount of labor that the monopsonist hires, when dynamite sells for $1.00 apiece, and the wage they offer. 4. The Macrofirm Corporation hires computer programmers on a competitive market, paying a wage of $10.00/hour. Their output " lines of code # is determined by the function Q = 100 E . The market will pay P = 1 ! Q 2000 for this product. Find the amount of labor that the monopolist employs....
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