Suppose a hypothetical economy has only two industries and labor is the only input for both industries. Workers are indifferent about which industry they work in and all workers are identical and able to move freely across the two industries. Suppose that the outbreak of war leads to an increase in demand for the defense industry. a. Adjust the labor market for defense graph to reflect the increase in demand. Wage (S/hour) 20 22 18 16 14 12 10 8 6 4 Defense Labor Market Quantity of Labor b. Adjust the agriculture labor market graph and the defense labor market graph to find the new equilibrium wage. Wage (S/hour) 20 18 16 14 12 10 4 2 0 Agriculture Labor Market D Quantity of Labor

Suppose a hypothetical economy has only two industries and labor is the only input for both industries. Workers are indifferent about which industry they work in and all workers are identical and able to move freely across the two industries. Suppose that the outbreak of war leads to an increase in demand for the defense industry. a. Adjust the labor market for defense graph to reflect the increase in demand. Wage (S/hour) 20 22 18 16 14 12 10 8 6 4 Defense Labor Market Quantity of Labor b. Adjust the agriculture labor market graph and the defense labor market graph to find the new equilibrium wage. Wage (S/hour) 20 18 16 14 12 10 4 2 0 Agriculture Labor Market D Quantity of Labor

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.6P

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