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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

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, there has been an increase in the market demand for products of firms in manufacturing industries. The production of many of these products requires the skills of welders. Because welding is a dirty and dangerous job compared with other occupations, in recent years fewer people have sought employment as welders. Draw a diagram of the market for the labor of welders. Use this diagram to explain the likely implications of these recent trends for the market clearing wage earned by welders and the equilibrium quantity of welding services hired.

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.

Describe how equilibrium wage rates are determined for perfectly competitive firms.

If more firms were to find ways to induce larger numbers of workers to hold true to labor supply commitments, would the market labor supply curve tend to shift to the left or to the right? Explain your reasoning.
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