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Unformatted text preview: Theorem, show how employment L changes if labour supply increases ( & ) : Use a graph to interpret the necessary condition for optimality [hint: plot three lines pF (L), [R + 2 L=& ] and w=R + L=& with L on the x-axis. Why is it optimal for the marginal revenue product of labour to exceed the wage paid?]. (iii) Output Q = F ( L ) and L = L s ( w ) : Show the necessary conditions for optimality imply optimal employment satis&es pF ( L ) = w [1 + 1 " ] where " = w L s dL s dw is the labour supply elasticity. Explain why this condition di/ers from the competitive solution [where pF ( L ) = w ] : 1...
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This note was uploaded on 12/31/2011 for the course ECON MR 102 taught by Professor Huyduong during the Winter '11 term at RMIT Vietnam.
- Winter '11