1 Assume that Labor and Kapital are purchased in a perfectly competitive market, and the end product is sold in a perfectly competitive market

LABOR P = $4 Kapital P = $6

Resource Total Product Marginal Product Total Revenue MRPl Resource Total Product Marginal Product Total Revenue MRPk

Labor Kapital

0 0 0 0 0

1 16 $32 1 24 $48

2 28 $56 2 41 $82

3 38 $76 3 53 $106

4 46 $92 4 63 $126

5 53 $106 5 72 $144

6 59 $118 6 80 $160

7 63 $126 7 86 $172

8 65 $132 8 89 $ 178

A At an output level of 99, what is the cost minimizing combination of Labor and Kapital? 10 pts

B At an output level of level of 154, what is the cost minimizing level of Labor and Kapital 5 pts

CIf the price of the product is $2.00, what is the profit maximizing combination of Labor and Kapital? What is the total profit? 10 pts

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2

Let's take another look at the minimum wage.

1. Is the minimum wage a price ceiling or price floor? Show this on a graph. Point out or describe any inefficiencies with regard to price and quantity.+ 5 pts
2. Is the minimum wage similar to any of the union models in chp 17? If so which one?+5 pts

3 Is there a different result for minimum wage, which you outlined in #1, if monopsony or monopsonistic power is injected into the analysis, AND your answer to #2? What might that be? Is there a different result for equilibrium price and wage you outlined in #1. If so, what would that be ? 15 pts