The nation of Ectcnia has 2.0 competitive apple or--chards, all of which sell apples at the world price of$2 per apple. 11,c following equations describe theproduction function and the marginal product of laborin each orchard:Q =IOOL - L2Ml'L = 100 - U,where Q is the number of apples produced in a day,Lis the number of workers, and MPL is the marginalproduct of labcr.a. What is each orchard's labor demand as a functionof the daily wage W? What is the mar ket's labordemand?b. &:tenia has 200 workers who supply their labcrinelastically. Solve for the '""gc W. How manyworkers docs each orchard hire? How much profitdocs each orchard owner make?c. Calculate what happens to the inoome of workersand orchard owners if the world price do ubles lo$4 per a pple.d. Now suppose the price is back a l $2 per apple,but a hurricane d estroys hall the orchards. Calcu•late how the hurricane affects the income of eachworker and of each remaining orchard owner.Wl,at happens to the income of Ectcnia as awhole?
The nation of Ectcnia has 2.0 competitive apple or--
chards, all of which sell apples at the world
$2 per apple. 11,c following equations describe the
production function and the marginal product of labor
in each orchard:
Q =IOOL - L2
Ml'L = 100 - U,
where Q is the number of apples produced in a day,
Lis the number of workers, and MPL is the marginal
product of labcr.
a. What is each orchard's labor
of the daily wage W? What is the mar ket's labor
demand?
b. &:tenia has 200 workers who supply their labcr
inelastically. Solve for the '""gc W. How many
workers docs each orchard hire? How much profit
docs each orchard owner make?
c. Calculate what happens to the inoome of workers
and orchard owners if the world price do ubles lo
$4 per a pple.
d. Now suppose the price is back a l $2 per apple,
but a hurricane d estroys hall the orchards. Calcu•
late how the hurricane affects the income of each
worker and of each remaining orchard owner.
Wl,at happens to the income of Ectcnia as a
whole?
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