Suppose that the employer is hiring workers in a perfectly competitive market where the market equilibrium wage is `$7`.
Graphing window shows horizontal axis: 0 to 14, vertical axis: 0 to 14. Start Graph, Color blue
x
y
0
10
1
8
2
6
3
4
4
2
5
-0
6
-2
7
-4
8
-6
Label "Labor (L)" at pixel coordinates (175,0).Label "Wage (w)" at pixel coordinates (0,170).Label "VMPL" at (1,10-1).
How many workers will be hired at this wage?
Find the wage on the vertical axis and read off the graph how many workers are available to work at that wage.
The table below shows data for the production of soda for an individual firm operating in an imperfectly competitive market.
Number of workers
Number of Pineapples
Marginal Revenue
0
0
29
10
90
28
20
162
27
30
216
26
40
252
25
50
270
24
Given this data, complete the table:
Quantity of soda
Marginal Product of Labor (MPL)
Marginal Revenue Product of Labor (MRPL)
0
-
-
10
9
252
20
7.2
194.4
30
5.4
140.4
40
3.6
90
50
1.8
43.2
Marginal product is the additional output of one more worker. Mathematically, Marginal Product is the change in total product divided by the change in labor: MPL = ΔTP/ΔL. Marginal Revenue Product = MPL x MR.
Suppose that a firm has market power in their output market. Suppose that the employer is hiring workers in a perfectly competitive market where the market equilibrium wage is $.
The graph below shows the labor demand curve for this firm.
Note: VMPL stands for Value of the Marginal Product of Labor. MRPL stands for Marginal Revenue Product of Labor.
Graphing window shows horizontal axis: 0 to 30, vertical axis: 0 to 30. Start Graph, Color red
x
y
0
35.833
1
34.833
2
33.833
3
32.833
4
31.833
5
30.833
6
29.833
7
28.833
8
27.833
9
26.833
10
25.833
11
24.833
12
23.833
13
22.833
14
21.833
15
20.833
16
19.833
17
18.833
18
17.833
19
16.833
20
15.833
21
14.833
22
13.833
23
12.833
24
11.833
25
10.833
26
9.833
27
8.833
28
7.833
29
6.833
30
5.833
Start Graph, Color blue
x
y
0
35.833
1
33.833
2
31.833
3
29.833
4
27.833
5
25.833
6
23.833
7
21.833
8
19.833
9
17.833
10
15.833
11
13.833
12
11.833
13
9.833
14
7.833
15
5.833
16
3.833
17
1.833
18
-0.167
19
-2.167
20
-4.167
21
-6.167
22
-8.167
23
-10.167
24
-12.167
25
-14.167
Start Graph, Color black
x
y
0
17
1
17
2
17
3
17
4
17
5
17
6
17
7
17
8
17
9
17
10
17
11
17
12
17
13
17
14
17
15
17
16
17
17
17
18
17
19
17
20
17
21
17
22
17
23
17
24
17
25
17
26
17
27
17
28
17
29
17
30
17
Label "Labor (L)" at pixel coordinates (175,0).Label "Wage (w)" at pixel coordinates (0,170).Label "VMPL" at (10,430/12-10). Label "MRPL" at (10,430/12-15).
What is the number of workers that this firm will hire if this firm is selling its output in an imperfectly competitive market?
9.42
For firms with market power in their output market, they choose the number of workers where the going market wage equals the firm's marginal revenue product.
Suppose that a firm DOES NOT have market power in their output market. Suppose that the employer is hiring workers in a perfectly competitive market where the market equilibrium wage is $17.
The graph below shows the labor demand curve for this firm.
Note: VMPL stands for Value of the Marginal Product of Labor. MRPL stands for Marginal Revenue Product of Labor.
Graphing window shows horizontal axis: 0 to 30, vertical axis: 0 to 30. Start Graph, Color red
x
y
0
38.333
1
37.333
2
36.333
3
35.333
4
34.333
5
33.333
6
32.333
7
31.333
8
30.333
9
29.333
10
28.333
11
27.333
12
26.333
13
25.333
14
24.333
15
23.333
16
22.333
17
21.333
18
20.333
19
19.333
20
18.333
21
17.333
22
16.333
23
15.333
24
14.333
25
13.333
26
12.333
27
11.333
28
10.333
29
9.333
30
8.333
Start Graph, Color blue
x
y
0
38.333
1
36.333
2
34.333
3
32.333
4
30.333
5
28.333
6
26.333
7
24.333
8
22.333
9
20.333
10
18.333
11
16.333
12
14.333
13
12.333
14
10.333
15
8.333
16
6.333
17
4.333
18
2.333
19
0.333
20
-1.667
21
-3.667
22
-5.667
23
-7.667
24
-9.667
25
-11.667
26
-13.667
27
-15.667
Start Graph, Color black
x
y
0
20
1
20
2
20
3
20
4
20
5
20
6
20
7
20
8
20
9
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
20
26
20
27
20
28
20
29
20
30
20
Label "Labor (L)" at pixel coordinates (175,0).Label "Wage (w)" at pixel coordinates (0,170).Label "VMPL" at (10,460/12-10). Label "MRPL" at (10,460/12-15).
What is the number of workers that would be hired if this firm would be selling its output in a perfectly competitive market?
18.33
Note that since marginal revenue is less than price, the demand for labor for a firm which has market power in its output market is less than the demand for labor for a perfectly competitive firm. As a result, employment will be lower in an imperfectly competitive industry than in a perfectly competitive industry.
The graph below shows the supply and demand curves for labor in a perfectly competitive market.
Graphing window shows horizontal axis: 0 to 13, vertical axis: 0 to 13. Start Graph, Color red
x
y
0
4
1
5
2
6
3
7
4
8
5
9
6
10
7
11
8
12
9
13
10
14
11
15
12
16
13
17
Start Graph, Color blue
x
y
0
8
1
7
2
6
3
5
4
4
5
3
6
2
7
1
8
0
9
-1
10
-2
11
-3
12
-4
13
-5
Label "Labor (L) in thousands" at pixel coordinates (175,0).Label "Wage (w)" at pixel coordinates (0,170).Label "Demand" at (1,8+1). Label "Supply" at ((13-4)/ 1,11).
What is the equilibrium quantity of workers hired in this market?
thousand
2
The equilibrium in the labor market occurs at the intersection of the demand for labor and the supply of labor.
The graph below shows the supply and demand curves for labor in a perfectly competitive market.
Graphing window shows horizontal axis: 0 to 13, vertical axis: 0 to 13. Start Graph, Color red
x
y
0
4
1
5
2
6
3
7
4
8
5
9
6
10
7
11
8
12
9
13
10
14
11
15
12
16
13
17
Start Graph, Color blue
x
y
0
10
1
9
2
8
3
7
4
6
5
5
6
4
7
3
8
2
9
1
10
0
11
-1
12
-2
13
-3
Label "Labor (L) in thousands" at pixel coordinates (175,0).Label "Wage (w)" at pixel coordinates (0,170).Label "Demand" at (1,10+1). Label "Supply" at ((13-4)/ 1,11).
What is the equilibrium wage that will prevail in this market?
$
7
Equilibrium wage is where supply intersects demand curve.
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