Without any change in the demand for labor, how are the following events likely to change the equilibrium wage and employment level in a dairy farm?
a) An increase in the population of the region where the dairy farm is located
b) The establishment of a cotton mill that pays higher hourly wages, near the dairy farm
c) The shutdown of a rice farm located near the dairy farm
a) An increase in the population of the region where the dairy farm is located is likely to increase the supply of labor in the region. An increase in the supply of labor, without any change in the demand for labor, will increase the employment level and decrease the wage rate in the dairy farm.
b) The availability of any employment opportunity that pays a higher wage than the dairy farm will increase the opportunity cost of working at the farm. This will cause a decrease in the supply of labor to the farm. A decrease in the supply of labor, without any change in the demand for labor, will decrease the employment level and increase the wage rate in the dairy farm.
c) The shutdown of a rice farm located near the dairy farm will increase the supply of labor to the dairy farm. An increase in the supply of labor, without any change in the demand for labor, will increase the employment level and decrease the wage rate in the dairy farm.
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