Questions:
1. Suppose the tennis ball market is competitive and the market price for a three-pack of tennis balls is $4.00. The production function of tennis balls is given by Q = 100L - L , where Q is the quantity of three-packs per day and L is units of labor. The firm pays its workers a going-market wage of $80 per day. How many units of labor should the firm hire?
a. 10
b. 20
c. 30
d. 40
2. A monopolist faces an inverse demand curve given by P = 60 - 2Q. The monopolist hires workers in a competitive market at a wage = $200. The monopolist's production function is Q = 10L.
How many units of labor should this firm hire?
a. 1
b. 2
c. 3
d. 4
3. In a competitive market, market labor supply conditions are given by W = 10,000L and market labor demand conditions are given by MRP =60,000 - 5,000L, where L is measured in thousands of workers. What is the equilibrium wage?
a. $10,000
b. $20,000
c. $30,000
d. $40,000
4. Suppose that the labor supply is given by W = 25 + 5L and MRP = 100 - 5L. What is the equilibrium wage under conditions of monopsony?
a. $25
b. $50
c. $75
d. $100
5. A monopsonist faces a labor supply curve with an elasticity of supply of 0.20. What is the Lerner Index for this firm as a measure of its monopsony power?
a. 2.2
b. 3.45
c. 0.75
d. 5.
6. An economist estimates two regression equations using data on all MLB teams:
(1) Wins = 10 + 0.01TB
(2) Team Total Revenue = $10,000,000 + $2,000,000Wins
where Wins is the number of team wins and TB is the team's total bases. Total bases is a measure of hitting performance and equals singles+ (2 x doubles) + (3 x triples) + (4 x home runs).
What is the MRP for a player with 250 total bases?
a. $4 million.
b. $6.5 million.
c. $5 million.
d. $4.25 million.