Another question from Wage Theory and Policy Problem Set

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Question 2 Suppose the labor supply curve for native Berkeley residents is S B (1.0) = 210. There is one rm in Berkeley. This rm acts as a price taker in both the labor and product markets. The product price is p = 2. The rm's production function is 1 f(E) = 6E 1132. Find the elasticity of labor supply for Berkeley residents. Write down the value of marginal product of employment (VMPE) for the rm. Find equilibrium employment and the wage. Calculate Berkeley residents' worker surplus, and the firm's producer surplus. WFWN!' A group of workers moves from Palo Alto to Berkeley. These workers are perfect substitutes for Berkeley residents, and their labor supply curve is Sp (w) = 2 + aw, where 0 S a S 1. Find the new total labor supply curve in Berkeley. 6. Find the new wage, Berkeley native employment, and Berkeley native surplus. How do the effects of Palo Alto workers on Berkeley native employment and surplus depend on 0:? Provide some intuition