1.The marginal product of labour is MP_L = 28 - 0.2L, where MP_L is the marginal product of labour (in units of output per hour) and L is the number of workers the firm employs. The supply of labour is W = 2 + 0.1L, where W is the wage (in $ per hour) and L is the number of workers willing to work for the firm.

a.If the competitive firm sells its output at the price P = $2/unit, what is the equilibrium wage and the number of workers the firm hires? Show your work. (3)

b.If the competitive firm sells its output at the increased price P = $2.50/unit, what is the equilibrium wage and the number of workers the firm hires? Show your work. (2)

2.Explain the impact of immigration on the Canadian labour markets (what happens to the Canadian wages and employment due to immigrants arrive in Canada, ceteris paribus)? Illustrate with a graph. Hint: remember that the demand for labour is a derived demand. (5)