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

Infant industry argument - reason for protection, Infant Industry Argument ...

Infant Industry Argument Advocates of this maintain that if an industry is just developing, with a good chance of success once it is established and reaping economies of sale,

Describe the meaning of managerial economics, MEANING OF MANAGERIAL ECONOMI...

MEANING OF MANAGERIAL ECONOMICS Managerial economics which is used synonymously with business economics is a branch of economics which deals with application of microeconomic ana

Diseconomies of scale, what are the four factors that lead to diseconomies ...

what are the four factors that lead to diseconomies of scale.

Determine the theory of exchange and price theory, Determine the Theory of...

Determine the Theory of Exchange and  Price Theory Theory of Exchange is commonly called Price Theory. Price determination under various types of market conditions comes under

Objectives of government in economy, OBJECTIVES OF GOVERNMENT Governme...

OBJECTIVES OF GOVERNMENT Government policies are required in market economies to achieve certain goals.  There are broadly two types of government policies viz; Microeco

Super-comfort pillow, In the country of Sleep-well, the inhabitants' main a...

In the country of Sleep-well, the inhabitants' main activity is... sleeping. Despite the loss of productivity that this entails, the country has a profuse and renowned production o

#titlmonopolistic competition and oligopolye.., #quest Describe the oligopo...

#quest Describe the oligopoly market structure and give some examples.ion..

Elasticity.., elasticity concepts occupies a central place in policy formul...

elasticity concepts occupies a central place in policy formulation explain in details

Examples of identity economics, Provide two examples of identity economics ...

Provide two examples of identity economics other than those given in the article

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