The Following Expressions Describe a Perfectly Competitive Labor Market

question 134

Essay

The following expressions describe a perfectly competitive labor market. The labor supply curve is:
S_L = AE = $3.00 + $0.000375L.
The marginal revenue product of labor curve is:
MRP_L = $13.00 - 0.000433L.
a. Find the equilibrium wage in this labor market. Also, find the optimal number of labor hours worked per week. Let L represent the number of labor hours worked per week, and let W represent the hourly wage of workers.
b. Determine the economic rent earned by labor in this situation.

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Definitions:

F Distribution

A continuous probability distribution that arises frequently as the null distribution of a test statistic, especially in the analysis of variance (ANOVA).

Numerator

The top number in a fraction, representing the part of the whole or the dividend in division.

Chi-square Distribution

A statistical distribution that describes the distribution of the sum of the squares of a set of variables, often used in hypothesis testing.

Random Variable

A variable that can take on numerical values based on the outcomes of a random event.