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Maximizing Labor Income. Consider a union that faces a linear demand for its workers. The vertical intercept is $40 and the slope is $0.20 per worker, so the horizontal intercept is 200 workers. (Related to Application 1 on page 709.)
a. The union faces a trade-off between the wage and employment: For every $2 increase in the wage, employment decreases by workers.
b. Suppose the union tentatively picks a wage of $30, where the elasticity of demand for labor is 3.0 (in absolute value). If the union decreases the wage by 5 percent, by how much will the quantity of labor demanded increase? Will total labor income increase or decrease?
c. Suppose the union s objective is to maximize total labor income. What is the income-maximizing wage and quantity of labor demanded?
Company Y is a monopoly industry. Its contribution margin is estimated at 20% (P-MC)/P = 0.2). From past experience, the owner has determined the following relationship exists between expenditures on advertising and total sales
Given the simple demand schedule information in the table above, calculate the coefficient of price elasticity of demand four times. Note that the coefficient of price elasticity of demand over the entire range of the demand schedule is 1, indicat..
Use the information in the following table, which summarizes the payoffs (i.e., profit) to two firms that must decide between an average Firm 2 Average Quality High Quality Firm 1 Average Quality 600, 600 400, 1100High Quality 1100, 400 900, 900 a. ..
Research the current value of the following economic indicators: Analyze the current macroeconomic situation. Discuss expectations of changes in economic, financial, and international conditions in the near future. Identify any economic issues of ..
Imagine an economy where a state-owned enterprise exists alongside a private firm that produces the same good. The private firm has a TEP level that is three times as high as the SOE: Ap = 3x As x the production functions are Yp=Ap x Np
Explain difference between profit maximization and shareholder wealth maximization and determine which of these is a more comprehensive statement of a firm's economic objectives?
Michael Illitch bought the Detroit Tigers in 1992 for $82 million, which amounted to $114.15 million in 2005 dollars. By 2005, the Tigers were worth $292 million. Calculate the real compound annual rate of return on that investment.
A monopoly sells music CDs. It has a constant marginal and average total cost of $20. It faces two groups of potential customers: honest and dishonest people. The dishonest and honest consumers' demand functions are the same,Qh = Qd = 120 - P.
To finance the investment, your organization or business would have to take out a loan. Suppose the interest rate on the loan is 12%, the dollar amount of the investment is $100,000 and the projected annual return from the project is 14%,
Suppose that instead of determining price based on his target return, Tom decides to use a standard markup pricing scheme. What is the optimal markup for Tom if she estimates that the price elasticity
Consider a competitive market served by many domestic and foreign firms. The domestic demand for thse firms' product is \(Q^{4} = 500 -1.5P\) The supply function of the domestic furms is \(Q^{SD} = 50 + 0.5P\) while that of foreign firms is \(Q^{S..
At the end of that time a mild recesion slowed the development so the parties signed another contract for $190,000 per year for 2 more years. Determine the present worth of the two contracts at an interest rate of 10% per year.
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