Question

Table 2 Units of Labor Total Product Imperfect Competition Marginal Marginal Product Total Revenue Product Price Revenue Product IIIIIII ||| 3. How many workers will the firm hire if the market wage rate is $27.95? 4. How many workers will the firm hire if the market wage rate is $19.95? 5. Compare the hiring practices of the firm under Pure Competition and Imperfect Competition. In which situation is the demand for labor more elastic?

Answer 1

Units of Labor (L)	TP	MP = ∆TP/∆L	P($)	TR ($) = P*TP	MRP($) =∆TRP/∆L
0	0		2.25	0.00
1	17	17	2.20	37.40	37.40
2	31	14	2.15	66.65	29.25
3	43	12	2.10	90.30	23.65
4	53	10	2.05	108.65	18.35
5	60	7	2.00	120.00	11.35
6	65	5	1.95	126.75	6.75

The firm should hire the number of workers where MRP is equal to or greater than the wage rate.

3. If the wage rate is $27.95, the firm will hire 2 workers. Because at 2 number of workers MRP > wage rate.

4. If the wage rate is $19.95, the firm will hire 2 workers. Because at 3 number of workers MRP > wage rate.