1- Draw a firm's labour demand curve that intersects the vertical axis at $20 per hour, and choose a point on the curve corresponding to an hourly wage of $12 and employment of 50 workers.

a) At the employment level of 50 workers, what is the firm's profit? (Hint: At each level of employment, the labour demand curve shows the additional value of production created by hiring an extra worker.

2.A bank has $200 reserves, $800 loans, $400 securities, $1200 deposits, and $100 debt.

a) Suppose there is a stock market boom, so that the bank's assets increase by 2 percent. What is the percentage change in the bank's capital? What is the change in the bank's capital in dollars?

b) Suppose that, instead of stock market boom, some borrowers default on their debt so that the bank's assets decrease by 2 percent. How much is now the bank's capital?