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

Development of transportation and marketing facilitates, Development of Tra...

Development of Transportation and Marketing Facilitates: The expansion of an industry may expedite the development of transportation and marketing facilities that will decrease th

Role of scarcity in economic decision making, Explain the role scarcity of ...

Explain the role scarcity of resources plays in economics decision making

Regression Analysis, Use a computer regression package, to work these two c...

Use a computer regression package, to work these two computer exercises. 2. Ozark Bottled Water Products, Inc. hired a marketing consulting firm to perform a test marketing of its

Using factor incomes for calculating national income, Using Factor Incomes ...

Using Factor Incomes for Calculating National Income     A second method is to sum up all the incomes to individuals in the form of wages, rents, interests and profits t

Elasticity, determinants of price expectation of elasticity

determinants of price expectation of elasticity

Marijuana, Plot the demand schedule and draw the demand curve for the data ...

Plot the demand schedule and draw the demand curve for the data given for Marijuana in the case above.

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)

State the market demand curve, The Market Demand Curve Quantity of a co...

The Market Demand Curve Quantity of a commodity that an individual is willing to buy at a particular price of the commodity during a specific time period, given his money incom

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