a. The marginal product of what the anicte prouc n The marginal revenue associat

Question

a. The marginal product of what the anicte prouc n The marginal revenue associated with the output the athlete produces th "a" and "b The marginal revenue product of the athlete e. all of the above Short Answer (10 points) Use complete sentences to answer question 31. Do not attempt to answer a question by simply writing down a number as the solution. You need to use complete sentences and show all of your work in order to receive full credit. 31. The following market is described by the demand and supply equations. (10 points) Os 5P (Supply) @d = 1 50-5P (Demand) a. Is there an excess supply of labor or an excess demand for labor if the wage is $107 How much is the excess supply of labor or the excess demand for labor if the wage is $10? (4 points) b. Is there an excess supply of labor or an excess demand for labor if the wage is $207 How much is the excess supply of labor or the excess demand for labor if the wage is $20? (4 points) c. Solve for the equilibrium wage and the equilibrium quantity of labor in this market. (2 points)

Explanation / Answer

Qs = 5P

Qd = 150 - 5P

a) Wage = $10

Qs = 5 * 10 = 50

Qd = 150 - (5 * 10) = 150 - 50 = 100

Qd > Qs. This implies, there is an excess demand of labor.

Excess demand = Qd - Qs = 100 - 50 = 50

b) Wage = $20

Qs = 5P = 5 * 20 = 100

Qd = 150 - 5P = 150 - (5 * 20) = 150 - 100 = 50

Qs > Qd. That is, there is an excess supply of labor.

Excess Supply = Qs - Qd = 100 - 50 = 50

c) Equilibrium => Qd = Qs

150 - 5P = 5P

10P = 150

P = 15

Therefore, equilibrium wage = $15.

Putting this wage in any of the demand or supply functions given,

Q = 150 - (5 * 15) = 150 - 75 = 75

Therefore, equilibrium quantity of labor = 75.

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