Perfectly competitive labor market

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Coldbox Corporation hires its workers in a perfectly competitive labor market and produces and sells frozen peas in a perfectly competitive product market. The market price for frozen peas is $4 per bag. The table below shows Coldbox' short-run production of frozen peas. Labor is the only variable input. Coldbox Corporation's fixed cost is $500.

-When Coldbox hires the second worker, does it experience diminishing returns? Explain.

-Calculate the average fixed cost if Coldbox hires 3 workers. Show your work.

-If the wage is $200 per worker, identify the profit-maximizing number of workers for Coldbox. Explain using marginal analysis.

-If the price of frozen peas decreases by $2 per bag, would the number of workers hired by Coldbox be more than, less than, or equal to the number of workers you identified in part (c) ? Explain.

-Suppose that Coldbox hires workers from a monopsonistic labor market. Would the wage be higher, lower, or equal to the equilibrium wage in a perfectly competitive labor market?

Reference no: EM132526601

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