Leadbelly Co. sells pencils in a perfectly competitive product market and hires workers in a perfectly competitive labor market. Assume that the market wage rate for workers is $80 per day.

Leadbelly should follow this rule to hire the profit-maximizing amount of labor: Hire workers up to the point where thevalue of the marginal product isgreater than $80 per day.

At the profit-maximizing level of output, the marginal product of the last worker hired is 20 boxes of pencils per day.

The price of a box of pencils is

.

The following graphs show the labor market for pencil workers and the labor supply and demand for Leadbelly Co. Suppose some pencil workers switch to jobs in the growing computer industry.

Show how this change affects the pencil market by shifting the labor-demand curve, labor-supply curve, or both.

Pencil MarketDemandSupply1601441281129680644832160WageQuantity of LaborDemandS1S2

Use the green line (triangle symbol) to graph the new labor-supply curve faced by Leadbelly Co.

Leadbelly Co.S21601441281129680644832160WageQuantity of LaborDemandS16, 64

This change causes the marginal product of labor at Leadbelly to .