2. The Competition Commission are concerned about a lack of competition amongst cellular providers in South...

  

Transcribed Image Text:

2. The Competition Commission are concerned about a lack of competition amongst cellular providers in South Africa. Suppose they issue licenses to 10 smaller cellular providers with the aim of providing more options for consumers. Use this information to answer the following questions. The average product of labour is 2 units and the current worker:owner production share is 70:30. Assume that 10% of the population of working age is unemployed, while the owners in the market make up 10% of the population of working age. a. Show the effect of this change on the labour market using the wage-setting and price- setting curves. b. What happens to the real wage and the employment level? c. Graph the impact of this change on the Lorenz curve. d. Show the effect of this change on the Gini coefficient using hypothetical values of your choosing. 2. The Competition Commission are concerned about a lack of competition amongst cellular providers in South Africa. Suppose they issue licenses to 10 smaller cellular providers with the aim of providing more options for consumers. Use this information to answer the following questions. The average product of labour is 2 units and the current worker:owner production share is 70:30. Assume that 10% of the population of working age is unemployed, while the owners in the market make up 10% of the population of working age. a. Show the effect of this change on the labour market using the wage-setting and price- setting curves. b. What happens to the real wage and the employment level? c. Graph the impact of this change on the Lorenz curve. d. Show the effect of this change on the Gini coefficient using hypothetical values of your choosing.