Assume That the Demand for Labour Is Given by the Inverse

question 90

Essay

Assume that the demand for labour is given by the inverse demand curve W = 5 - 0.1L where W is the nominal wage and L is the number of hours worked. Assume that the inverse supply curve of labour is W = 0.1L. In this case, the MC of labour is W = 0.2L.
i)Find the equilibrium wage and employment under perfect competition.
ii)Find the equilibrium wage and employment under monopsony.
iii)Assume that the government enacted a minimum wage where W = $10. Find the equilibrium wage and employment.

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