. Consider the labor market in a pre-Neolithic economy. There are three activities: hunting (h), gathering (g), and fishing (f). Workers may only be employed in one activity at a time. Each activity produces the same output, food (q). There is no money. There are no other factors of production. Workers are compensated for their efforts in food; hence, the wage is in real terms, i.e. w = MPL. Labor may move costlessly between activities. The marginal productivity of labor schedules for each activity are as follows: MP Lh = 100 − 1 2 Lh MP Lg = 100 − 1 4 Lg MP Lf = 100 − Lf There are L = 630 individuals in the economy, all facing the grim, Hobson’s choice of “work or starve.” a. Assuming that workers move to the activity where compensation is the highest, what must be true about equilibrium compensation in each of these activities?
