Increase in demand
The following table describes the VMPs of 10 workers in a hypothetical labor market.
Further assume that Firm 1 pays a worker a piece rate and Firm 2 pays a time rate equal to $40/hour.
(a) How do workers sort themselves across firms?
(b) What happens if there is an increase in demand that increases the price of the firm's product by 10%?
(c) What is there is an increase in demand that increases the price of the product by 20%?