percentage of aggregate income on the vertical axis, plot
the Lorenz curve for Fantasyland.
c. How does the diagram show the extent of income
inequality in Fantasyland?
d. Now suppose Fantasyland introduces a system that
redistributes income from higher-income households to
lower-income households. How would this affect the
Lorenz curve?
12. The following diagram shows the market for labour in a particular
industry. It shows both the supply of labour (the average cost of
labour) and the marginal cost of labour for a monopsonist.
a. Suppose the labour market is competitive. Indicate on the
diagram the equilibrium wage and level of employment
(call them w* and L*).
b. Continuing our assumption the labour market is
competitive, now suppose the government imposes a