Edna Has a Monopoly in the Sale of Engineering Services

question 27

Essay

Edna has a monopoly in the sale of engineering services in the local market. Also, Edna is the only employer of high skilled labor in the local market. The marginal product of labor is:
MP_L(L) = 250.
The marginal revenue of engineering services is:
MR(L) = 12,000 - 0.25L
The local supply of high skilled labor is:
L^S (w) = 200w - 10,000
Or equivalently
w = 50 + 0.005L^S
This implies Edna's marginal high-skill labor wage bill expenditures is:
ME(L) = 50 + 0.01L
Determine Edna's optimal level of employment. Also, what is the wage rate Edna pays for a unit of high skilled labor? What is the marginal revenue of the product of labor at the optimal employment level? Suppose Edna acted as a wage taker in determining high-skilled labor employment. How much labor would she hire and at what wage rate? At this level of employment, calculate the marginal revenue of the product of labor.

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Definitions:

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