- This Section Reflects Short Analytical And Computational Questions To Get Any Marks You Must Show Your Work 1 Conside 1 (50.77 KiB) Viewed 9 times
This section reflects short analytical and computational questions. To get any marks you must show your work. 1. Consider the market for labour underlying the Hotel Chocolat chocolates manufacturing plant in South of Saint Lucia. Assume that the labour market is perfectly competitive, with a downward sloping demand and an upward sloping supply. The labour supply is given by Supply: w = L + 2, where w is the wage per hour worked and L is the number of employees in thousands. The marginal product of labour is given by MP₁ = 10-0.5L. The market for chocolates is in equilibrium and the price of a chocolate is $2. a. Based on the information given can leisure be a normal good? Explain (4 marks) b. Find the equilibrium wage and the level of employment. (4 marks) c. From your answer in b, is there unemployment? (1 marks) d. From your answer in b, is the market outcome efficient? Explain why or why not. (3 marks) e. The demand for chocolates goes up. Briefly describe in words how does this change in the market for chocolates affect the underlying labour market (i.e. equilibrium wage, employment and unemployment)? (4 marks)