2007 AP Micro FRQ#2 (Labor)
Watch me answer it here
Remember, a firm in a perfectly competitive market, that can hire all it wants at the wage rate of $90 a day per worker has a horizontal labor supply curve.
b) What is Hzrad's profit maximizing output level? Explain.
c) Hzrad is the first company to use the new technology that increases the productivity of its unskilled workers.
i) How will the new technology effect the quantity of workers hired?
ii) How will the new technology effect the wages paid to Hzrad's workers?
Notice, with the increase productivity (MP of labor has increased) and the firms demand for labor shifts right (increases) more labor is desired. Because the Perfectly Competitive firm's productivity happens to it first the market is unaffected and therefore
the wage rate is unchanged.
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