15Gottwage_ratesShow

15Gottwage_ratesShow - Ch. 15 Wage Rates in Competitive...

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15 - 1 Ch. 15 Wage Rates in Competitive Labor Markets Assumes: perfectly competitive output market perfectly competitive input market. Questions: How many workers will a firm hire? What determines the wage for workers. Does a minimum wage law help workers?
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15 - 2 Marginal physical product ( MPP L ) output (TP) by adding one more unit of a resource (e.g. labor) [in physical units] L Q MPP =
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15 - 3 Marginal revenue product ( MRP ) TR if hire one additional worker MRP = MPP L x price or MRP = TR L
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15 - 4 EXHIBIT 1A OUTPUT AND MARGINAL PHYSICAL PRODUCT CURVES
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15 - 5 Firm’s DD L Quantity DD L depends on price of labor Inverse or direct? Wage rate -- price of labor. Total labor cost (TLC) = L x w Marginal labor cost (MLC) MLC = TLC L
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EXHIBIT 2A MARGINAL LABOR COST CURVE Assume all workers receive same wage. What is relationship between w and MLC ? Special
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15Gottwage_ratesShow - Ch. 15 Wage Rates in Competitive...

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