Draw on a single graph the time to transition to a new labor equilibrium when a firm faces variable adjustment costs for the following two firms.
(a) A trucking firm currently employs 100 drivers. If the economy enters an expansionary period, the firm would like to employ 120 drivers for the foreseeable future. If the economy enters a contractionary period, the firm would like to employ 80 drivers for the foreseeable future. There are few regulations in the hiring and firing of truck drivers.
(b) A liberal arts college currently employs 100 professors-70 of whom are tenured, 20 of whom are on a tenure-track position, and 10 of whom are instructors not on a tenure track. (An assistant professor with a tenure-track position will eventually be denied tenure and asked to leave the college or she will eventually be granted tenure. Tenured faculty can only be released by the college if the professor engages in improper behavior or if the college faces extreme financial problems.) If the economy enters an expansionary period, the college would like to employ 120 professors for the foreseeable future. If the economy enters a contractionary period, the college would like to hire 80 professors for the foreseeable future. Legally it is very difficult to remove tenured professors, even during bad economic times. It is also very difficult to find (and hire) many high-quality professors during good economic times. Finally, almost all of the college's professors must be tenured or on a tenure-track position in order to satisfy student and parent demands that the college employ high-quality professors.