Answer to Question #83440 in Microeconomics for parii

Question

Suppose a single firm has the marginal revenue product schedule for a particular type of labour given in the following table.
Number of units of labour MRP of labour
1 $12
2 11
3 10
4 9
5 8
6 7
7 6
8 5
(a) Assume there are 150 firms with the same marginal-revenue-product schedules
for this particular type of labour. Compute the total or market demand for this labour
by completing column 1 in the table below.
(1)
Quantity of
labour
demanded
(2)
Wage
rate
(3)
Quantity of
labour
supplied
_____ $12 1350
_____ 11 1200
_____ 10 1050
_____ 9 900
_____ 8 750
_____ 7 600
_____ 6 450
_____ 5 300
(b) What will be the equilibrium wage rate and how many workers will be hired?
(c) How would the imposition of a $9 minimum wage rate change the total amount
of labor hired in this market?

Answer 1

L MRP

1 $12

2 11

3 10

4 9

5 8

6 7

7 6

8 5

(a) Assume there are 150 firms with the same marginal-revenue-product schedules

for this particular type of labour. Compute the total or market demand for this labour

by completing column 1 in the table below.

(1)

QDL = 150*L

QDL w QSL

150 $12 1350

300 11 1200

450 10 1050

600 9 900

750 8 750

900 7 600

1050 6 450

1200 5 300

(b) At equilibrium QDL = QSL, so the equilibrium wage rate is $8 and 750 workers will be hired.

(c) The imposition of a $9 minimum wage rate will decrease the total amount of labor hired in this market to 600 workers.