The Market for Production Workers in a Midwestern Metropolitan Area

Essay

The market for production workers in a Midwestern metropolitan area is highly competitive. The market supply and demand curves for production workers are given as:
L_S = -2500 + 1000W L_D = 10500 - 625W,
where L_D = labor demand is full time workers per hour,
L_S = labor supply is full time workers per hour, and W = hourly wage. White Manufacturing Co. employs production workers in the manufacture of bearings for skate boards. The firm's production function is given by the expression:
Q = 88.8L - 0.5L²,
where Q = output, measured as boxes of bearings per hour, and L = number of workers employed per hour. From this production function, the marginal product and average product of labor are:
MP = 88.8 - L AP = 88.8 - 0.5L
White currently sells bearings for $10 per box.
a. Determine the equilibrium wage and level of employment in the market. Calculate the total rent that is being earned by workers.
b. Determine the number of workers that White Manufacturing would employ at the wage determined in part (a). What total output will White produce?