ch12hw - W 1 experience an increase in economic rent, as do...

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Chapter 12 - Homework Suggested Solutions Problem13: Hours per Week Hourly Wage Q 1 Q 2 Q 3 Q T $ 5 20 0 0 20 $ 6 25 0 0 25 $ 7 35 10 0 45 $ 8 45 25 10 80 $ 9 42 40 30 112 $ 10 38 37 45 120 Individuals 1 and 2 have backward-bending supply curves; the market supply curve is not backward-bending. Problem 14: If the demand for the product increases, firms are willing and able to buy more labor at each wage rate than they could before. The derived demand for labor shifts from D 1 to D 2 , moving equilibrium in the following graph from point a to point b . The wage rises from W 1 to W 2 , and employment rises from E 1 to E 2 . Workers who had been willing to work at wage rate
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Unformatted text preview: W 1 experience an increase in economic rent, as do all new workers who would have been willing to work for less than W 2 . Economic rent increases by W 1 ab W 2 . Total opportunity cost also rises. Workers who were unwilling to work at W 1 have higher opportunity costs than those who were working at the lower wage rate. Now that some of the workers with higher opportunity costs are employed in this market, total opportunity cost rises by E 1 abE 2 ....
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