(a) The analysis of Figure 11-5 does not mention the price of output. What is implicitly being assumed about the product market in the analysis?
(b) Instead of thinking of output as depending on the wage level, the analysis in Figure 11-5 can be altered to think of revenue as depending on the wage level. Redraw Figure 11-5 under this approach. Demonstrate the optimal efficiency wage in your graph. Characterize in words the optimal efficiency wage.