4. (3 points)- Use the table to answer the questions that follow below. Assume p
ID: 1115409 • Letter: 4
Question
4. (3 points)- Use the table to answer the questions that follow below. Assume perfectly competitive labor and product markets. Number of Total MarginalProduct Marginal Product Marginal Product Workers Product 25 26 27 28 29 30 31 32 Price $4 Rev. Product Price $2Rev. Product 480 498 514 528 540 550 558 564 568 20 (a-i) Assume that the product price is $4 and that the market-determined wage is $24. How many workers should this firm hire? (a-ii) What would be the impact (i.e., change in the number of workers hired) on this firm if there was a minimum wage of $16? (b-i) Now assume that the product price falls to $2 and the market-determined wage $16. How many workers should this firm hire? falls to (b-ii) What would be the impact (i.e., change in the number of workers hired) on this firm (it is now facing Product Price S2 and market wage S16) if there was a minimum wage of $20? (c) Given the marginal revenue product numbers when the product price is $2, now assume a union is formed by workers in this industry. How many workers would the union want to supply? Briefly explain.Explanation / Answer
a) When price of product is 4 and market wage is 24, we find that MRP is 24 for 32 workers. Hence the firm will hire 32 workers
b) When minimum wage of 16 is in place, it has no effect because the market wage is already higher than minimum wage
c) At wage rate of $16 and price = $2, it now hires 31 workers.
d) At a minimum wage of 20, this firm would have hired 30 workers So it would hire one less worker
e) Aim of a union is to maximize the wages of its members. This implies total wage bill should be maximum. This gives TRP and TRP is maxium when 25 workers are hired. Union will supply 26 workers
Workers TP MP Price = 4 MRP Price = 2 MRP TRP 25 480 26 498 18 72 36 936 27 514 16 64 32 864 28 528 14 56 28 784 29 540 12 48 24 696 30 550 10 40 20 600 31 558 8 32 16 496 32 564 6 24 12 384 33 568 4 16 8 264Related Questions
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