Micro2Solutions

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Unformatted text preview: se the following figure to answer question 40: Wage rate (S per hour) MCL S $12 $10 $8 MRP 10 15 16 20 Labour Q40. Suppose this labour market is controlled by a monopsony. If a minimum wage low is passed and now the employer is required to pay at least $10 an hour, a) b) c) d) e) 10 units of labour will be hired 15 units of labour will be hired 16 units of labour will be hired 20 units of labour will be hired None of the above Solution: c) 16 units of labour will be hired Wage rate is fixed at $10 an hour MCL=$10 (up to 16 units of labour). Profit is maximized when MCL= MRP L=16. Q41. Suppose a family earns zero income and receives a monthly transfer payment of $2,000 from the government. If the family earns $500 in a month, the government payment drops to $1,500. What is the marginal tax rate in this case? a) b) c) d) e) 20 % 25% 50% 75% 100% Solution: e) 100% Marginal tax rate = change in tax / change in income Change in tax =$500; Change in income (before tax) = $500 Marginal tax rate = 500 / 500 = 100 % Page 26 of 33 ©Prep101 www.prep101.com/freestuff Use the followi...
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This note was uploaded on 08/26/2010 for the course ECON 208 taught by Professor Dickenson during the Fall '07 term at McGill.

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