2. Graphing demand for labor and computing the optimal quantity Consider a company operating in a competitive market. The company sells units of output and receives a price of $30 per unit, and pays a daily market wage of $375 to each worker it employs. In the following table, complete the column for the value of the marginal product of labor (VMPL) at each quantity of workers. Labor Output Marginal Product of Labor Value of the Marginal Product of Labor (Number of workers) (Units of output) (Units of output) (Dollars) 0 0 16 15 14 1 1 8 5 64 On the following graph, use the blue points (circle symbol) to plot the rm '3 labor demand curve. Then, use the orange line (square symbols) to show the wage rate. (Note: If you cannot place the wage rate at the level you want, move the two end points individually.) Hint: Remember to plot each point halfway between the two integers. For example, when the number of workers increases from 0 to 1, the value of the marginal product for the first worker should be plotted with a horizontal coordinate of 0.5, the value halfway between 0 and 1. Line segments will automatically connect the points. 500 O 450 Demand 400 350 Market Wage Rate 300 WAGE (Dollars per worker) 250 200 150 100 50 O 5 0 2 3 LABOR (Number of workers) The profit-maximizing quantity of labor at the market wage is8. Links between factor markets The following scenario examines markets for factors of production, which include land and labor, used to produce wheat in Kansas in 1935. During this time periodknown as the Dust Bowlmajor dust storms caused residents of Kansas to migrate west to such states as California and Washington. It also made the land in Kansas much less useful for producing wheat. Using the example of the Dust Bowl, show the effects of these two changes on the market for labor in Kansas on the following graph. /'\\ (2/ Market for Labor 0 Supply Demand El Supply a + _ _ _ _ _ _ _ _ _ _ E I I I I I Demand I I I I I LABOR From the graph, you can deduce that the migration of workers leads the equilibrium quantity of labor in Kansas to V . Now consider the effect this change in the labor market has on the land market. In particular, think about the effects of the diminished productivity of land and the exodus of farm workers on the value of land in Kansas. Assuming the supply of land is unchanged, illustrate these effects on the land market in Kansas on the following graph. G) Market for Land / , 0 Suppl Demand inf SUPply ----------+ l I I I I Demand I I I I I LAND RENTAL PRICE