Pete?s Pools digs swimming pools for wealthy Seattle residents. Pete currently pays his workers the going wage, $10 per hour. The labor market he faces is depicted below:

a. How many workers does Pete hire at $10 per hour?

b. Seattle recently increased its minimum wage to $15. How will Pete adjust his hiring in the short run?

c. As Pete adjusts his hiring, what will happen to the productivity of Pete?s capital? In the long run, how will Pete adjust his capital?

d. As Pete adjusts his capital, what happens to the productivity of his employees? Illustrate the effects of the shift in capital in your graph. How will Pete adjust his hiring?

e. Connect your initial and final wage?labor points to create Pete?s long-run demand for labor.

Transcribed Image Text:

Wages ($) $15 10 MRPL 5- 20 Quantity of labor 10 15 LO