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Chapter 10: Labor demand (page 369)

How does a change in the demand for a product affect the demand for labor?

Short Answer

Expert verified

law of demand

Step by step solution

01

Labor demand

changes in demand for a product can have short-term changes in the price of the product. If we see an increase in demand for a certain product we will also then see a rise in the demand for the factors of production needed to produce that product and vice versa

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Most popular questions from this chapter

A monopolist firm faces a demand with constant elasticity of -2.0. It has a constant marginal cost of $20 per unit and sets a price to maximize profit. If marginal cost should increase by 25 percent, would the price charged also rise by 25 percent?

The following table shows the demand curve facing a

monopolist who produces at a constant marginal cost of $10:

Price

Quantity

18

0

16

4

14

8

12

12

10

16

8

20

6

24

4

28

2

32

0

36

a. Calculate the firm’s marginal revenue curve.

b. What are the firm’s profit-maximizing output and price? What is its profit?

c. What would the equilibrium price and quantity be in a competitive industry?

d. What would the social gain be if this monopolist were forced to produce and price at the competitive equilibrium? Who would gain and lose as a result?

In some cities, Uber has a monopoly on ride-sharing services. In one town, the demand curve on weekdays is given by the following equation: P = 50 - Q. However, during weekend nights, or surge hours, the

demand for rides increases dramatically and the new demand curve is: P = 100 - Q. Assume that marginal cost is zero.

a. Determine the profit-maximizing price during weekdays and during surge hours.

b. Determine the profit-maximizing price during weekdays and during surge hours if MC = 10 instead of zero.

c. Draw a graph showing the demand, marginal revenue, and marginal cost curves during surge hours from part (b), indicating the profit-maximizing price and quantity. Determine Uber’s profit and the deadweight loss during surge hours, and show them on the graph.

Will an increase in the demand for a monopolist’s product always result in a higher price? Explain. Will an increase in the supply facing a monopsonist buyer always result in a lower price? Explain.

Suppose a profit-maximizing monopolist is producing 800 units of output and is charging a price of \(40 per unit.

a. If the elasticity of demand for the product is -2, find the marginal cost of the last unit produced.

b. What is the firm’s percentage markup of price over marginal cost?

c. Suppose that the average cost of the last unit produced is \)15 and the firm’s fixed cost is $2000. Find the firm’s profit.
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