2005 AP Micro FRQ #3 (Factor Markets/Labor)
Watch me answer it here
a) In what kind of market structure does this firm sell its output? Look at the directions above,,, "The firm can sell all the shirts it can produce to retailers at the price of $20 dollars. Read it again,"The firm can sell all the shirts it can produce to retailers at the price of $20 dollars. Read it again,"The firm can sell all the shirts it can produce to retailers at the price of $20 dollars. Question - can a monopoly sell all the goods it wants at the same price,,, NO., it must lower its price to sell more.. Only a perfectly competitive (price taker) industry market could do this....
(Answer: Perfectly Competitive Market)
b) In what kind of market structure does this firm hire its workers? Again, look at the directions, "P & L can hire all of the workers it wants at a market wage rate of $120 per day per worker. Read it again, "P & L can hire all of the workers it wants at a market wage rate of $120 per day per worker." Read it again, "P & L can hire all of the workers it wants at a market wage rate of $120 per day per worker." (Answer: this is a Perfectly Competitive (price taker) labor market.)
The rest is self explanatory - use a chart!!!
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