ECON 261 Lecture Notes - Lecture 4: W. M. Keck Observatory

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5 Aug 2020

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There are 4 workers in this economy , jack , fred, Melba) are highly skilled ( q=0. 9) ; the other two ( fred and daphne) are less skilled ( q=0. 3). Output is given by the product of the q-levels for example firm 1 might hire a high skill worker and a low skill worker. Output of thsi firm would be 0. 9*0. 3= 0. 27. Total income: calculate the total output that would be produced by these two firms under each of the following scenarios: Firm a hires jack and fred and firm b hires melba and daphne. Firm a hires jack and melba and firm b hires fred and daphne. Pairing the high skill workers in one of the team and low skill workers leads to highest output level. 0. 90: repeat the above calculations but with highly skilled workers having a q value of 0. 6 and low skill workers 0. 5. Output of a output of b total output.

Related Questions

Suppose there are two types of workers. Type 1 workers have a marginal product of labor (MP_L) = 1. That is, if a firm hires an extra Type I worker, that worker will produce 1 extra unit of output. Type II workers have an MP_L = 2. The firm can sell each extra unit of output for P = $10,000.

Firms are unable to identify whether or not a worker is a Type I or Type II unless the worker sends a signal of what type they are. The signal that workers can send is a level of education, e. The firm adopts the following hiring strategy:

If e > e* then offer the worker a wage rate equal to $20,000.

If e < e* then offer the worker a wage rate equal to $10,000.

The cost to Type I workers of getting education level e is $4000*e. The cost to Type II workers of getting education level e is $2000*e. Assuming the workers optimally choose e, characterize the values of e* that will lead to a separating equilibrium.

bronzemarten122

Suppose you work as research economist at the EPA. There are two firms that operate in a perfectly competitive market. This implies that each has the same marginal benefit curve, which in this case is horizontal at MB = $100. Each of the firms, however, has a different marginal private cost schedule: MPC1= 20+Q and MPC2=30+2Q Each firmâs production process creates externalities that are valued by society at $10 per unit output. a) Show that without government intervention, the firmsâ profit maximizing outputs are Q=80 for firm 1 and Q=35 for firm 2, and the market price is $100. b) Now calculate the socially optimal level of output for each firm. c) Your boss knows that the firms are currently producing too much output and simply decides that all firms should cut their output by 15%. Show that this is an inefficient solution to this externality problem.

taupebear890

There exist two types of workers in the market, distinguished by some characteristic that has no relationship to labor market productivity. There are 100 types of 1 worker and 100 types of 2 workers. The productivity per hour worked of each type is equal to 2. The product price is fixed at p = 2. Each type of worker has the same labor supply function as in the previous problem, that is h_i =1 + w_i.

(a) Assume that the labor market is inhabited by a monopsonist. The monopsonist's production function is q = H₁+ H_2. The objective of the monopsonist is to maximize his utility, which is given by u = p(H₁ + H₂) - H₂ - w₁H₁ - w₂H_2, where H_i= 100(1 + w_i).

The term -H₂ in the utility function of the monopsonist reflects a distaste for having employees of type 2. What are the monopsonist's utility-maximizing choices of w₁ and w_2?

(b) Say that the labor market becomes competitive in the following sense. Other firms enter the market that is simply profit-maximizers, that is, they have no distaste for hiring type 2 workers. What happens to the wage of type 1 and type 2 workers? What happens to the welfare of the (former) discriminatory monopsonist if he is obligated to offer employment to any individual willing to supply hours to the firm (that is, whether they are type 1 or type 2) at the competitive wage rates prevailing in the labor market?

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ECON 261 Lecture Notes - Lecture 4: W. M. Keck Observatory

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