The following is a labor supply function: Wage per hour Quantity of Nurse Suppli
ID: 1252133 • Letter: T
Question
The following is a labor supply function:
Wage per hour Quantity of Nurse Supplied
$2 1
4 2
6 3
8 4
10 5
12 6
Nurses are used by the clinic to provide clinic visits. Each visit brings in $2 in revenue for the clinic. The relationship between nursing units and clinic visits is as follows:
Quantity of Nurses Total Clinic Visits
1 5
2 9
3 12
4 14
5 15
The provider is assumed to maximize profits. Determine the provider’s equilibrium wage and how many nursing units it will hire. The provider is a monopsonist, which means it is the sole purchaser of labor in the market.
Explanation / Answer
Revenue is as follows Q Visits Revenue (Visits*2) 1 5 10 2 9 18 3 12 24 4 14 28 5 15 30 Cost is Wage Q Cost 2 1 2 4 2 8 6 3 18 8 4 32 10 5 50 12 6 72 The hospital want to hire as long as additional (marginal) revenues are at least equal to additional (marginal) costs. Therefore it wants to hire 2 nurses as the additional cost of hiring a third (18-8=10) exceeds the additional revenues (24-18=6).
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