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Assignment #13: Labor Markets
Use the table below to answer the following questions
Number of
Workers Total
Product Marginal Product
Average Product Price MRP MRC
Total Labor Cost MFC
Marginal Profit
27 270 $3.50
28 279 $3.50 $9.00
29 287 $3.50 $9.25
30 294 $3.50 $9.50
31 300 $3.50 $9.75
32 305 $3.50 $10.00
33 309 $3.50 $10.25
34 312 $3.50 $10.50
35 314 $3.50 $10.75
1. Complete the table above
2. A competitive labor market would hire _______workers at a wage of ______________
3. Draw a graph illustrating the competitive markets hiring decision (two side-by-side graphs)
4. A mopsonistic labor market will hire _________ workers at a wage of ______________
5. Draw a graph illustrating the monopsonistic markets hiring decision (two side-by-side graphs)
7. Now suppose a labor union successfully negotiated a labor contract setting wages at $14. What
would this do to the competitive labor market depicted in the above table?
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8. Draw a corresponding graph to your answer for question 7.
9. Now suppose a labor union successfully negotiated a labor contract setting wages at $14. What
would this do to the monopolistic labor market depicted in the above table?
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10. Draw a corresponding graph to your answer for question 9.
11. Suppose the demand for the firm’s product has increased due to a change in preferences. The
increase in demand increased the price of the good to $4.50.
a. Complete the table below for the new price level.
b. As a result of the new price the new competitive wage rate is _______and ________workers
will be employed
c. Draw two side-by-side graphs representing the derived demand for this firm’s labor demand
Number
of
Workers
Total
Product
Marginal
Product
Average
Product Price MRP MRC
Total
Labor
Cost MFC
Marginal
Profit
27 270
28 279 $9.00
29 287 $9.25
30 294 $9.50
31 300 $9.75
32 305 $10.00
33 309 $10.25
34 312 $10.50
35 314 $10.75
