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Chapter 28: 28.5. - For Critical Thinking (page 624)

Contrast wage determination under monopoly and perfect competition.

Short Answer

Expert verified

In a perfectly competitive market, price equals marginal cost, and firms earn no economic profit. The cost of a good is determined by the intersection of the demand and supply curves in Perfect Competition.

Step by step solution

01

Introduction.

Large wage disparities may be the result of a combination of factors such as employment industry, geographic location, and worker skill. This article investigates decile wages in order to determine professions with significant wage discrepancies.

02

Dedication to monopoly power.

In a perfect competition market, valuable consideration marginal cost, and businesses make no actual gain. In a strong hold, the price is fixed above the production cost, and the organization makes a good profit.

03

Explanation.

In Perfect Competition, the cost of a good is determined at the intersection of the demand and supply curves. This is known as the Equilibrium position, and the price is recognized as the Market equilibrium.

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Most popular questions from this chapter

Since the beginning of this century, there has been a significant increase in the price of corn-based ethanol.

a. A key input in the production of com-based ethanol is com. Use an appropriate diagram to explain what has likely occurred in the market for corn if the supply curve has not shifted.

b. In light of your answer to part (a), explain why many hog farmers, who in the past used corn as the main feed input in hog production, have switched to cookies, licorice, cheese curls, candy bars, and other human snack foods instead of corn as food for their hogs.

Suppose that we were to observe unemployment in the labor market depicted in Figure 28-4. Would this imply that the current wage rate is above or below the $1,000 equilibrium weekly wage rate in the figure? Explain briefly.

Take a look at the two panels of Figure 28-5. Explain why at the points labeled E1, U.S. firms might have an incentive to outsource labor services abroad. In addition, explain why the shifts in the demand curves to the positions denoted D2 occur in each panel.

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.

Other things being equal, how would a firm adjust if the market clearing wage rate for older workers decreases relative to the market clearing wage rate for younger workers? Explain briefly.
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