Question

13. A firm hires its labor in a perfectly competitive factor (or resource) market and sells its product in a perfectly competitive product market. a. Using correctly labeled side-by-side graphs, show each of the following: i. The equilibrium wage rate in the market ii. The labor supply curve the firm faces iii. The demand curve the firm faces iv. The number of workers that the firm hires

Answer 1

Attached below are the graphs

Step-by-step explanation:

i) The Equilibrium wage rate in the market is determined by the Intersection of the labor demand and supply curve as seen in the graph attached

ii) The Labor supply curve the firm faces is perfectly elastic in a perfectly competitive resource market

iii) The demand curve of the firm is perfectly elastic because in competitive market a slight change in price will cause a massive change in demand

iv) The firm will continue hiring as long as MRP ≥ MFC

( MRP = marginal revenue product , MFC = marginal factor cost )