Econ 339 Fall 2009 Problem Set 3_1

Econ 339 Fall 2009 Problem Set 3_1 - Econ 339 Fall Quarter...

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Econ 339 Fall Quarter 2009 Problem Set 3 - Due Date: 10/19/2009 Solve the following Problems. Show your work. 1. Problems: 3-1, 3-4, 3-7, 2. Problems: 4-6 3. (a) What happens to the long-run demand curve for labor if the demand for the firm’s output increases? (b) What happens to the long-run demand curve for labor if the price of capital increases? 4. Suppose the labor supply curve is upward sloping and the labor demand curve is downward sloping. The study of economic trends over a particular time period reveals that the wage recently fell while employment levels rose. Which curve must have shifted and in which direction to produce this effect? 5. Chicken Hut faces perfectly elastic demand for chicken dinners at a price of $6 per dinner. The Hut also faces an upward sloped labor supply curve of E = 20w – 120, where E is the number of workers hired each hour and w is the hourly wage rate. Thus, the Hut faces an upward sloped marginal cost of labor curve of MC E = 6 + 0.1E .
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