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Assume the quantity of envelopes licked per hour by Sticky Gums, Inc. q = 10,000 \sqrt{L} where L is the number of laborers hired per hour by the...

1. Assume the quantity of envelopes licked per hour by Sticky Gums, Inc., is:

q = 10,000 L

where L is the number of laborers hired per hour by the firm. Assume further that the envelope licking business is perfectly competitive with a market price of 1 cent per envelope.


A. How much labor would be hired at a competitive wage of $10? What about $5? $2?

Use these results to sketch a demand curve for labor.


B. Assume that Sticky Gums hires its labor at an hourly wage of $10 what quantity of envelopes will be licked when the price of a licked envelope is 2 cents? What about 5 cents? 10 cents? Use your results to sketch a supply curve for licked envelopes.

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