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Unformatted text preview: e short-run equilibrium.
(a) Draw a correctly labeled graph for the typical firm, illustrating the short-run equilibrium and labeling the
equilibrium market price and output PE and QE, respectively.
(b) Assume there is an increase in the market wage rate for labor, a variable input. Show on your graph in
part (a) the effect of the wage increase on the marginal cost curve in the short run.
(c) Assume that avocado producers hire workers from a perfectly competitive labor market. Draw a graph of
labor supply and demand for the typical firm and label the supply curve MFC and the demand curve MRP.
Assume the market wage rate increases from w1 to w2. Show the effect of the wage increase on the graph,
labeling the initial quantity of labor hired QL1 and the new quantity of labor hired QL2. 3. Assume that the market for good X is perfectly competitive and that the production of good X creates...
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This note was uploaded on 02/03/2014 for the course ECONOMIC 112 taught by Professor Van le during the Fall '12 term at American Internation College.
- Fall '12
- van le