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Questions are from labour economics please post the solutions in order thank you! 5. a. Consider a firm that sells its output in a perfectly

image text in transcribedimage text in transcribed

Questions are from labour economics

please post the solutions in order thank you!

image text in transcribedimage text in transcribed
5. a. Consider a firm that sells its output in a perfectly competitive product market, and hires labour in a perfectly competitive labour market. The value of the marginal product of labour (in dollars] is given by: VMPL = 30 - 2L Assuming that the firm is a profit maximizer and can hire labour at $W per unit, derive its labour demand function. b. Given that there are 10 identical firms (like the firm described in part (a)) in the industry, show that the market labour demand is given by: LD = 150 - 5W The supply function of labour to this market is given by: LS = 10W Solve for the equilibrium wage and level of employment in this market. c. In an effort to stimulate employment in this indus- try, the government offers firms a subsidy of $3 per unit of labour hired. Analyze the effects of the subsidy on the level of employment and the workers' wages. d. The government's opposition parties accuse the government of catering to "corporate welfare bums" with the wage subsidy/handout. They suggest that the money would be better spent by putting the money directly into the hands of the workers. They propose that the governmentshould directly give workers an additional $3 for each unit of labour worked. Evaluate the argu- ment put forward by the opposition parties by comparing workers' employment and incomes wages plus government bonus) to the scheme in part (c)

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