Consider Tessa, from Tessa’s Techs, as given in Problem 1. Tessa is struggling to find workers in a tight labor market.

a. Suppose that the struggle to find qualified workers is due to Tessa’s location in an isolated Idaho town. If the tight labor market drives the going wage for online support workers up to $84 for a four-hour shift, how should Tessa adjust her hiring?

b. Suppose the tight labor market is due to exploding demand across the entire tech sector, and as a result it affects all tech support firms, not just Tessa. If the increased cost of hiring qualified support personnel drives up the price of a service call from $6 to $7, how will Tessa adjust her hiring?

c. Explain how the feedback of wages into prices causes labor demand to be less elastic than it would otherwise be.