Question

Assume the price of steel per ton is 100$/ton for a steel factory when the factory sells 100 tons perd ay. Also, assume for each additional 100 tons the price falls 7.5$. Assume in order to produce per 100 ton the factory employs 10 workers. Assume daily wage is 100$ per day. Take 100 tons as 1 unit. Also, assume the number of workers company hires and fires is a factor of 10. So calculate whenever you calculate marginal calculate, marginal labor cost per worker for the last 10 workers. Also, assume all other costs except the labor costs are negligible.
a) Construct a table that shows marginal revenue, total revenue and average revenue for every 100 ton, between the production levels 100 ton and 1000 ton of steel.
b) What will be the optimum number of workers employed in that case? Draw the graph for the perfectly competitive case. Show the competitive market equilibrium
c) Assume the factory relocated itself near a small town with a very little labor supply. Now assume labor market is competitive and wage rate is 100$ per day when the factory employs 10 workers, however it rises by 15$ per additional 10 workers factory employs. Assume the revenue structure of the factory has remained the same. (Price level per ton of steel sold is the same.) Construct a table showing marginal cost, total cost and the average cost for every 100 ton of steel between production
levels 100 ton and 1000 tons of steel.
d) Draw the graph of a monopsony case. How much is the exploitation in this case? Show the competitive market equilibrium and the optimum point for the monopsony on your graph

Answer 1

a) Toal Rewwe (TR mutiplyu Calculatd 0) Harginal Revenu e-LHR)- us calcul ated to $35 70 字55 40 300 Se to 6o to 62S 1T. 40 9e 36,evo 20 32 S

to thi CHC). om ptit It i calculated Tc can be calculated mu ipt the labo joge TO MC 00 o oo e00 Co. leo--Sebo 10 20 1e0 700 空00-10 90B0 1o 11e0 25 110 100-1000 10 3o 6o 13000 to 300

Theurte,_p= HC Wh n_1260-.units he optimal number woku 100 4o do Hc and Ac-

ACTCQ xh lo 30 40 30 YS 175-10,S㈥ 12,380 161490 a 200 Go Y 19 3구-

too 0 go Demand to aus MC

700 units duca d o tabou le empl move labors to - 190