Labor Market Practice I - Labor Demand -Assume labor is the only variable input in the production of coffee mugs. TR=PxQ, MP =ATP/AL, MRP=MPLXxP, or you can also use MRP=ATR/AL L TPorQ MPL is VMPL or MRPL | VMPL or MRPL TP means total | additional at P=3 at P=5 At $19 At 313 P 3 product & Q is | output per V is value and output worker MRP is the marginal revenue product 1 __--_--- 1. How many workers should the firm hire when the price of mugs is $3 and the wage is $19? How do you know? 2. Suppose that schools that teach pottery skills increase the supply of workers who can make coffee mugs and because of this the wages are now $13. How many workers should the firm hire and why? 3. Suppose that the demand for coffee mugs increases and the price of coffee mugs increases to $5 and the wage rate is $13. How many workers should the firm hire and why? II - EXPLAIN THE FOLLOWING 1. What would happen in the lumber labor market (lumberjacks) if the demand for lumber increases? 2. What did the increase in the price of lumber do to the value of the marginal product of lumberjacks (or the MRP of lumberjacks) and their wages? 3. How has the demand for lumber impact the firm and the owners of resources