Question: Suppose technology is such that the labour-managed firm in the short run faces an average earnings curve which is inverse U-shaped, as in Figure. Use this short-run diagram to illustrate:
(a) the change in the level of earnings after an increase in price at the initial equilibrium level of employment;
(b) the change in the marginal revenue product of labour after an increase in price at the initial equilibrium level of employment;
(c) the new equilibrium level of earnings and employment after an increase in price;
(d) the new equilibrium level of earnings and employment after an increase in capital rentals.
