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    increase in demand

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    The following table describes the VMPs of 10 workers in a hypothetical labor market.

    Worker VMP/hour
    1 $10
    2 $20
    ..
    9 $90
    10 $100

    Further assume that Firm 1 pays a worker a piece rate and Firm 2 pays a time rate equal to $40/hour.

    (a) How do workers sort themselves across firms?
    (b) What happens if there is an increase in demand that increases the price of the firm's product by 10%?
    (c) What is there is an increase in demand that increases the price of the product by 20%?

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    https://brainmass.com/economics/labour-economics/vmps-10-workers-hypothetical-labor-market-80026

    Solution Summary

    Explores the increases in demand.

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