Assume that the initial equilibrium in a labor allocation diagram is given as it is shown in the figure below. It differs from the standard Specific Factors Model in that the marginal product of labor in the Y-industry is assumed to drop to zero at a certain industry size. As you can see in the figure, the initial production equilibrium is determined at this certain industry size.

Assume that the initial equilibrium in a labor allocation diagram is given as it is shown in the figure below. It differs from the standard Specific Factors Model in that the marginal product of labor in the Y-industry is assumed to drop to zero at a certain industry size. As you can see in the figure, the initial production equilibrium is determined at this certain industry size.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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