Question

This problem asks you to consider a roofing company. The company hires workers to install new roofs.

You should assume both the (output) market for roofs and the labor market for roofers are perfectly

competitive, and that the firm must pay the equilibrium wage set in the labor market and charge the

equilibrium price for installing a new roof set in the market for roofs. You may additionally assume the

relevant labor market is “roofers in Northeast Iowa”.discuss the impact on the quantity of labor that a typical profit-maximizing roofing

company will hire. Use graphs to explain your answer and summarize your answer in a sentence

The field switches from using 3-tab shingles to architectural shingles. Because 3-tab shingles

need to be installed more precisely, it takes a roofer longer to install them. Architectural

shingles are more forgiving, allowing a roofer to install more roofs per week.

i. Assume first this change impacts our representative firm only. Our small firm

hires a very small percentage of all the roofers in Northeast Iowa.

ii. Now assume all roofing companies switch to architectural shingles. What will

happen in the labor market for roofers? How will this impact the final number of

roofers hired?

Answer 1