In Chapter 11, we showed the relationship between marginal revenues and market price for a monopoly to be given by where e is the elasticity of supply of labor to thefirm. Use this equation to show a....

In Chapter 11, we showed the relationship between marginal revenues and market price for a

monopoly to be given by

where e is the elasticity of supply of labor to

thefirm. Use this equation to show

a. that for a firm that is a price taker in the labor

market, ME ¼ w;

b. that ME > w for a firm facing a labor supply

curve that is not infinitely elastic at the prevailing wage; and

c. that the gap between ME and w is larger the

smaller e is.

Explain all of these results intuitively.