SQ5_LaborMarketsAK

Congressional staff economists have urged legislators

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Unformatted text preview: 100. d. If LB=500, then WB=11. Thus, there will be a $3 wage differential between industry A and industry B. e. The market outcome is not efficient. The value of the marginal product of labor in industry B is only 11, while the value of the marginal product of labor in industry A is 14. Since the value of the marginal product of labor is higher in industry A than industry B, total surplus would be higher if workers shifted from industry B to industry A. Total surplus is maximized when the value of the marginal product of labor is the same in both industries. W W 16 16 1600...
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