Larry’s Lumber Mill sells lumber in a perfectly competitive product market. However, Larry’s Lumber Mill is the only employer of labor in the small community where it is located. The labor market is depicted by the graph above. (a) Using the labels from the graph above, identify each of the following.

(i) The optimal quantity of labor Larry’s Lumber Mill will hire

(ii) The wage rate Larry’s Lumber Mill will pay

(b) Using the labels from the graph above, identify the number of workers Larry’s Lumber Mill would hire if the labor market were perfectly competitive.

(c) Because of growing housing demand, the price of lumber increases. What will happen to each of the following?

(i) Larry’s Lumber Mill’s demand for labor. Explain.

(ii) The supply of labor