assignment#3 ECN203 due oct,28 - 0 to W At this time the...

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Assignment #3 ECN203 Xiangying Wu 1. 2. Firms will make MC=P * , and firms will produce Q 0 goods corresponding to P * . Economic profits in this case is the area. Because Economic profits= P * Q 0 - AC Q 0 >0, the economic profits are positive. Because there are profits in the market for ethanol, individual famers will supply more and more ethanol, and more and more famers will enter the market. Therefore supply curve shifts rightward. The result is a increase in Q, and a decrease in P, until the P *’ = minimum of AC( the change in market is shown above) 3.
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Because the supply is less than demand, and the wage rate is less than the equilibrium wage rate, so there is a pressure to force wage rate to rise from W
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Unformatted text preview: 0 to W * . At this time, the supply of labor equals to demand of labor. 4. Because there is a desire in many families to convert from a 2-worker household to one, there is a decrease in supply of labor. As a result, the supply curve shifts leftward. As the graph shown above, the wage rate increases from W 1 to W 2 , and the number of labor decreases from N 1 to N 2 . 5. Because the energy and labor are complementary inputs, a rise in price of crude oil results in a decrease in demand of labor. Therefore, the demand curve shifts leftward. The number of labor decreases from N 1 to N 2 ,and the wage rate decreases from W 1 to W 2....
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This note was uploaded on 06/16/2011 for the course ECON 101 taught by Professor Na during the Fall '09 term at University of North Carolina School of the Arts.

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assignment#3 ECN203 due oct,28 - 0 to W At this time the...

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