ProblemSet3

# ProblemSet3 - Economics 3203 Fall 2010 Problem Set 3 Labor...

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Economics 3203 – Fall 2010 Problem Set # 3: Labor Demand (cont.) + Intro Labor Supply Due Monday, Sept. 27 (in class) 1. Willy Wonka’s chocolate factory is the only producer of the everlasting gobstopper, a type of candy that you can continue to eat forever and will never lose its flavor. The demand for gobstoppers can be expressed as: P = 60 - 2Q where Q is the daily quantity of gobstoppers, and P is measured in dollars. The only input in production of gobstoppers is the labor provided by Wonka’s special assistants, the oompa loompas. Their labor supply curve is perfectly elastic at a wage of \$2/hr. Using L to represent total hours worked in the factory each day, the production function is: Q = [2L-200] 1/2 , i.e. Q 2 = 2L - 200 a) Find the profit-maximizing price and level of employment. You can approach this using MRP = ME L (labor market optimization) or MR = MC (product market optimization). Both will eventually lead to the same answer. For extra practice, try it both ways and make sure

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## This note was uploaded on 06/07/2011 for the course ECP 3202 taught by Professor Hamersma during the Fall '10 term at University of Florida.

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ProblemSet3 - Economics 3203 Fall 2010 Problem Set 3 Labor...

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