Question 2 (a)

  • Factor market for machines and company

    • Graph MRP as a downward-sloping line in the company side.


Question 2 (b)

  • The marginal produce curve will not change no matter how the demand of the product changes.

    ![Derived Demand of Labor: MPL, MRP, MRC Demand for labor is directly tied to 2 factors: labor productivity and price of the output labor produces MRP = MPL x p Additional output produced from additional worker Increase with technology [training • If MPL+ = MRP (DE) MRC: cost of hiring an additional worker output Price of the good firm is producing— determined in the product market Increase with an increase demand for the good • MRP (DE) In perfectly competitive labor market MRC is constant (horizontal SL curve) For monopsonist MRC is greater than sc , MRC increases as Q increases ](./media/image241.png)

Question 3 (c)

  • There is no deadweight loss if the government is imposing a per-unit tax to correct for negative externality.

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