determine the wage rate , Managerial Economics

Assignment Help:

Northern Lumber operates a large lumber-processing mill in a small town in Washington State.  It is one of the larger lumber producers in the region and has some market power in the sale of that product.  A recent consulting study has indicated that the price elasticity of demand for the firm's product is about -3.0.  Also, Northern is the dominant employer in the local labor market, and effectively can be considered as a monopsonist in the purchase of labor.  The firm's labor demand (i.e. marginal revenue product) function is;
      MRP = 1 000 - 2L

where L is the number of workers.  Because of its size relative to the labor supply in the area, Northern faces an upward sloping labor supply function,
      w = 50 + 0.025L and ME = 50 + 0.050L

where w is the daily wage rate and ME is the marginal expenditure on labor.

Once the firm determines the optimal rate of labor input and the wage rate, the rate of output is determined.  The firm uses a cost-plus pricing formula that includes the price elasticity of demand as a determinant in setting product price.  The same study indicated that average cost is about RM300 per unit (1 000 board feet) of lumber.

Requirements

1.    Determine the amount of labor that the firm should employ in order to maximize profit.

2.    Determine the wage rate the firm will have to pay.

3.    What price will the firm charge per unit of output?


Related Discussions:- determine the wage rate

Average revenue (ar), Average Revenue (AR) This is the revenue per uni...

Average Revenue (AR) This is the revenue per unit of the commodity sold.  It is obtained by dividing Total Revenue by total quantity sold.  For a firm in a perfectly competiti

Differentials and disequilibrium, DIFFERENTIALS AND DISEQUILIBRIUM In ...

DIFFERENTIALS AND DISEQUILIBRIUM In a free enterprise system, workers aim at maximizing their wages.  Hence, it would be expected that workers would move form low-paying indus

Organization for economic development (oecd), Organization for Economic...

Organization for Economic Development (OECD) An international organization found in Paris France in 1961, to act as a worldwide forum to stimulate world trade and

Long-term policies to cure balance of payment deficits, Long-Term Policies ...

Long-Term Policies One long term option of tackling balance of payments deficit is export promotion .  In the long run this is the best method of improving a balance of payme

Total cost (tc), Total Cost (TC) This is the sum of fixed costs and va...

Total Cost (TC) This is the sum of fixed costs and variable costs i.e. TC = FC + VC.

What are the forecasting techniques, Write the forecasting techniques ...

Write the forecasting techniques There are many forecasting techniques available to person assisting the business in planning its sales. Take for instance a forecasting metho

Economic theories, Topic:  Company Case Study and Industry Analysis   ...

Topic:  Company Case Study and Industry Analysis   Instruction:  1) choose a company;                     2) recognize the market industry type;                     3)

Price elasticity of demand, For some time, two firms have charged $0.90 per...

For some time, two firms have charged $0.90 per standard unit of crating materials for shipping a particular type of machine tool and each has been selling about 20,000 units per m

Phillips curve, PHILLIPS CURVE   The Phillips  curve,  named  after  A....

PHILLIPS CURVE   The Phillips  curve,  named  after  A.  W.  Phillips,  describes  the  relationship between unemployment  and  inflation. In  1958  Phillips, then  professor a

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd