What is the shadow price of labor when output is maximized subject to a labor co

Question

What is the shadow price of labor when output is maximized subject to a labor constraint?

In a perfectly competitive market, what curve can be drawn from the firm’s short run supply curve?

What benefits can be attained for society from appropriate levels of government regulation of businesses?

When demand is perfectly elastic, what portion of costs from regulation are borne by consumers?

Define the Nash equilibrium concept.

For two projects with the same cost, does the more risky one have the highest standard deviation or the lowest standard deviation?

In terms of the cost of capital, what do profits in a perfectly competitive industry equal in the long run?

In terms of externalities, what justifies governmental subsidization of health, research, education and personal security?

In terms of market failure, explain why utility companies are typically placed under extensive government regulation.

Explanation / Answer

When output is maximised with repect to the labor constraint the shadow price of labor depicts the maximum value the firm is willing to pay for each additional hour of labor.The value of the shadow price can provide decision-makers with insights into problems. For instance if a constraint limits the amount of labor available to you to 40 hours per week, the shadow price will tell you how much you should be willing to pay for an additional hour of labor. If your shadow price is $10 for the labor constraint, for instance, you should pay no more than $10 an hour for additional labor. Labor costs of less than $10/hour will increase the objective value; labor costs of more than $10/hour will decrease the objective value. Labor costs of exactly $10 will cause the objective function value to remain the same.

2) In a perfectly competitive market ,the Marginal Cost curve can be derived from the short run supply curve of the firm.

3) Bussinesses function on the principle of profit maximisation.In order to maximise profits if they incur any costs or negative externality towards the society , they do not account for it.In that case its the government which can impose regulations over them such that they internalise their costs that they incur to the society.

4) Tax burden is borne together by consumers and producers .However the part of market which faces the inelastic demand or supply has to share more of the tax burden.Thus if the demand is perfectly elastic consumers would not bear any part of the tax.i.e. all tax would be borne by the sellers.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.