(Key Question) Describe wage determination in a labor market in which workers are unorganized and many firms actively compete for the services of labor. Show this situation graphically, using W1 to indicate the equilibrium wage rate and Q1 to show the number of workers hired by the firms as a group. Show the labor supply curve of the individual firm, and compare it with that of the total market. Why the differences? In the diagram representing the firm, identify total revenue, total wage cost, and revenue available for the payment of nonlabor resources.
The labor market is made up of many firms desiring to purchase a particular labor service and of many workers with that labor service. The market demand curve is downward sloping because of diminishing returns and the market supply curve is upward sloping because a higher wage will be necessary to attract additional workers into the market. Whereas the individual firm’s supply curve is perfectly elastic because it can hire any number of workers at the going wage, the market supply curve is upward sloping.
For the graphs, see Figure 13.3 and its legend.
(Key Question) Complete the following labor supply table for a firm hiring labor competitively.
| | |Total |Marginal resource | |Units |Wage |labor cost |(labor) cost | |of labor |Rate |(wage bill) | | | | | | | | | | | | | | | | |0 |$14 | |$____ |$____ | | |1 |14 | |____ |____ | | |2...
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