Question 4-20 points The market for labor in Industrial Zone in Cikarang is very

Question

Question 4-20 points The market for labor in Industrial Zone in Cikarang is very competitive with the following demand and supply functions Ls "'-2.500 + 1000W; LD = 10, 500-625w Lp is the demand for full time worker (per hour); Ls is supply of full time worker (per hour) and W is wage per hour Kulitlandak Manufacturing Co. employs the workers with the following production fun ction: 0.5L2 Q is output (measured as shoes per hour) and L is number of worker per hour a Speify the marginal produet and average product function ( pointe) b.Assume that the market price for shoes is Rp100,000, calculate the equilibrium wage AND rate and the equilibrium quantity of worker. Then, calculate the economic rent accrues to worker. (10 points) c. Calculate the optimal number of worker employed by Kulitlandak Manufacturing Co at the equilibrium wage rate obtained in point b. Then, calculate its total output. (5 points)

Explanation / Answer

Given production function is

Q=88.8L-0.5L^2

Therefore Marginal product of labour is when we differentiate production function with L

dQ/dL=88.8-L

Average production function is

88.8-0.5L

Equilibrium quantity of labour and wage per worker is given by Ld =Ls

1625 W = 13000

W= 13000/1625=2600/325=520/65=104/13=8

L= -2500+1000(8)=5500

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