Department of Economics
Inputs in Competitive Markets
The Krakow Manufacturing Company raises crocuses for the retail market. The market for
crocuses is competitive. Also, relative to the market, their demand for labor is quite
small. The relationship between various amounts of labor input and the firm's output is
a. Fill in the blank columns.
b. Krakow employs three units of labor in its crocus operation. This information
establishes the wage rate prevailing in the labor market. What is the wage that Krakow is
paying each of its three units of labor
c. If the wage for a unit of labor rose above
, then Krakow would not
not hire any labor at all and leave the industry, even in the short run.
d. There is technological breakthrough in the crocus industry which raises the
productivity of labor. The result of the breakthrough is that the ouput at any level of
employment is twice what it was before. If the wage rate remains at the same level as in
part b., how much labor will Krakow now employ