DSE 2009

Posted by s on Feb 18, 2012; 8:19am
URL: http://discussion-forum.276.s1.nabble.com/DSE-2009-tp7296495.html

Can someone please explain how to go about this sum.

Suraksha’ is the sole producer and supplier of security systems
in India and the sole employer of locksmiths in the labour market. The demand for
security systems is D( p ) = 100 − p , where p is the price. The production of security
systems only requires locksmiths and the production function is given by f ( L) = 4 L ,
where L is the number of locksmiths employed. The supply curve for locksmiths is
                                                 
given by L( w) = max    0, w/2-20 , where w is the wage rate.
                                   
24. How many locksmiths will ‘Suraksha’ employ?
       a) 5
      b) 10
     (C) 15
      d) 20

25. If the government sets the minimum wage is 70 , how many locksmiths will
Suraksha employ?
         a)            5
         b)            10
         c)            15
         d)            20


for the first part i maximised the monopolist's problem  and derived output supply function as a function of w then provided he'll produce this y* labor emplyment is L* = Y*/4 that is how i got the labor demand function of firm then at market equilibrium i equated LD with LS ..but my ans L*=6 and the correct ans is 10..please help