1. (10 points) Assume that for a particular skill level of labor, the market clearing wage is 10 dollars.Given the following relationship between wages paid and output, what wage should the firm pay?What was your decision rule?Will the market clear? If not will there be a surplus or a shortage of labor?

Wages Per HoursOutput Per Hour

$1049

1158

1266

1373

1479

1583

1686

1788

1. (12 points) a. Convert the following total variable cost schedule for UP Against the Wall Industries into the total cost schedule, the average fixed cost (AFC) schedule, the average variable cost (AVC) schedule, the average total cost (ATC) schedule and the marginal cost (MC) schedule.Assume that total fixed costs are 60.

QTVCTFCTCAFCAVCATCMC

10120

11125

12128

13132

14140

15152

16168

b. The union has won a wage increase for the workers at Up Against the Wall Industries (UAW).What will happen to UAW's ATC, AFC and MC curves. Your options are to shift up, shift down or stay the same.The answer is not necessarily the same for each curve.