1st question

6. Plotting the supply of labor In Provo, 135 people are willing to spend an hour working as pizza makers for an hourly wage of $20. For each additional $5 that the wage increases above $20, an additional 45 people are willing to spend an hour working. For hourly wages of $20, $25, $30, $35, and $40, plot the daily labor supply curve for pizza makers on the following graph. 50 45 Supply 40 35 30 25 WAGE (Dollars perhour) 20 15 10 5 0 0 45 90 135 180 225 270 315 360 405 450 LABOR (Number of workers) What is one explanation for why this labor supply curve is upward sloping? O Firms are willing to hire fewer pizza makers at a higher wage. The opportunity cost of leisure decreases as wages decrease. Unemployment benefits are steadily declining. Wages have to increase to accommodate union pressure.8. Collusive outcome versus Nash equilibrium Suppose there is a remote stretch of highway along which two restaurants, Last Chance Cafe and Desolate Diner, operate in a duopoly. Neither restaurant invests in keeping up with health code regulations, but regardless they both have customers as they are the only dining options along a 79- mile portion of the road. Both restaurants know that if they clean up and comply with health codes they will attract more customers, but this also means that they will have to pay workers to do the cleaning. If neither restaurant cleans, each will earn $11,000; alternatively, if they both hire workers to clean, each will earn only $6,000. However, if one cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $16,000, and the other restaurant will make only $2,000. Complete the following payoff matrix using the information just given. (Note: Last Chance Cafe and Desolate Diner are both profit-maximizing firms.) Desolate Diner Cleans Up Doesn't Clean Up Cleans Up Last Chance Cafe Doesn't Clean Up If Last Chance Cafe and Desolate Diner decide to collude, the outcome of this game is as follows: Last Chance Cafe and Desolate Diner If both restaurants decide to cheat and behave noncooperatively, the outcome reflecting the unique Nash equilibrium of this game is as follows: Last Chance Cafe , and Desolate Diner