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Chapter 28: Q. 12 (page 646)

A profit-maximizing monopolist hires workers in a perfectly competitive labor market. Employing the last worker increased the firm's total weekly output from 110 units to 111 units and caused the firm's weekly revenues to rise from \(25,000 to \)25,750. What is the current prevailing weekly wage rate in the labor market?

Short Answer

Expert verified

The current prevailing weekly wage rate in the labor market is$750

Step by step solution

01

Introduction.

The prevailing wage rate is the average wage paid to similarly employed people in a specific occupation in the intended employment area.

02

Given Information.

The following information are given to find current prevailing weekly wage rate:

Total firm's output=110to 111units.

Firm's weekly revenues=$25,000to$25750

03

Step3:

The wage rate is equal to the change in revenue divided by the change in output. The output is raised from 110to 111units.

As a result, the output increased by 1unit (111-110=1)per week.

This increased output causes the firm's weekly revenue to rise from $25,000to $25,750.

As a result, revenue increased by$750per week.

(25,750-25,000=750)

As a result, the labour market's weekly wage rate is,

=(750/1)=750.

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Most popular questions from this chapter

The following table depicts the output of a firm that manufactures computer printers. The printers sell for $100each.

Labor Input
(workers per week)		 Total Output
(printers per week)
10 200
11 218
12 234
13 248
14 260
15 270
16 278

Calculate the marginal product and marginal revenue product at each input level above 10 units.

Explain how the following events would affect the demand for labor.

a. A new education program administered by the company increases labor's marginal product.

b. The firm completes a new plant with a larger workspace and new machinery that workers can utilize and that does not substitute for the functions provided by workers' labor.

Explain what happens to the elasticity of demand for labor in a given industry after each of the following events,

a. A new manufacturing technique makes capital easier to substitute for labor.

b. There is an increase in the number of substitutes for the final product that labor produces.

c. After a drop in the prices of capital inputs, labor accounts for a larger portion of a firm's factor costs.

A monopoly firm hires workers in a perfectly competitive labor market in which the market wage rate is \(20 per day. If the firm maximizes profit, and if the marginal revenue from the last unit of output produced by the last worker hired equals \)10, what is the marginal product of that worker?

Recently, Swedish companies have outsourced manufacturing labor previously performed by Swedish workers at \(20 per hour to U.S. workers who receive a wage rate of \)10 per hour. Evaluate the effects of Swedish manufacturing-labor outsourcing on Swedish and U.S. employment levels and wages.
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