Problem
1. What happens to the long-run demand curve for labor if the demand for the fir's output increases? What happens to the long-run demand curve for labor if the price of capital increases? Decompose the changes into scale and substitution effects.
2. Union A wants to represent workers in a firm that hires 20,000 workers when the wage rate is $4 and hires 10,000 workers when the wage rate is $5. Union B wants to represent workers in a firm that hires 30,000 workers when the wage rate is $6 and hires 33,000 workers when the wage rate is $5. Which union would be more successful in an organizing drive?