View the step-by-step solution to:

Answer the following questions: Describe wage determination in a labor market in which workers are unorganized and many firms actively compete for...

Answer the following questions:
1. Describe wage determination in a labor market in which workers are unorganized and many firms actively compete for the services of labor. Show this situation graphically, using W1 to indicate the equilibrium wage rate and Q1 to show the number of workers hired by the firms as a group. Show the labor supply curve of the individual firm, and compare it with that of the total market. Why the differences? In the diagram representing the firm, identify total revenue, total wage cost, and revenue available for the payment of nonlabor resources.
2. How do the concepts of accounting profit and economic profit differ? Why is economic profit smaller than accounting profit? What are the three basic sources of economic profit?
Classify each of the following according to those sources:
a. A firm’s profit from developing and patenting a new medication that greatly reduces cholesterol and thus diminishes the likelihood of heart disease and stroke.
b. A restaurant’s profit that results from construction of a new highway past its door.
c. The profit received by a firm benefiting from an unanticipated change in consumer tastes.

3. Suppose that you hear two people arguing about energy. One says that we are running out of energy. The other counters that we are running out of cheap energy. Explain which person is correct and why.

4. Recall the model of non-renewable resource extraction presented in Figure 15.7. Suppose that a technological breakthrough means that extraction costs will fall in the future (but not in the present). What will this do to future profits and, therefore to current user cost? Will current extraction increase or decrease? Compare this to a situation where future extraction costs remain unchanged but current extraction costs fall. In this situation, does current extraction increase or decrease? Does the firm’s behavior make sense in both situations? That is, does its response to the changes in production costs in each case maximize the firm’s stream of profits over time?

This question was asked on Mar 17, 2010.

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors and customizable flashcards—available anywhere, anytime.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access or to earn money with our Marketplace.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
  • -

    Flashcards

    Browse existing sets or create your own using our digital flashcard system. A simple yet effective studying tool to help you earn the grade that you want!

    Browse Flashcards