3. (105 points) You can hire all the workers you want at $100 per worker. The output price of your product is $10. Fill in the Table below (10 points) TABLE 1 (Note: W = $100) Ne Ye MPN MRPNA Marginal Profit Total Profit P= $10 P= $12- P= $104 P = $124 04 P= P= $10-$12e le 200 e e 38 e e WIN 532 e e 4 662 t e t t t 5 772 2 2 e 6 86 3 7 93 e e a) (5 points) How many workers will you hire and what is your maximum profit in nominal terms? In real terms? b) (5 points) Suppose due to the phone ringing off the hook, you decide the raise the price of your output - fill in the P = $12 columns. How many workers will you hire now and what is your maximum profit in nominal terms? In real terms? c) (10 points) In the space below, draw the supply curve for your firm. Be sure to put all the shift variables in parentheses next to the supply curve (like we did in class. Please label as point A when the price is $10 and as point B when the price is $12. d) We now have another shock and that is it is next to impossible to keep workers at $100 per day - so you decide to raise wages to keep your workers and that new wage is $120 per day. Please fill in the following table (10 points). TABLE 2 (Note: W = $120) Ne Ye MPNMRPN Marginal Profit Total Profit P= $10 P = $12 P=$104 P = $12 0- P= P= $100 $12 20 e e 24 382 t 3 53e e 4 66 e 5e 77e tu 6 862 74 93e e) (5 points) How many workers will you hire and what is your maximum profit in nominal terms when the price of your output is $10? In real terms? Note, this is when the wage is $120. f) (5 points) How many workers will you hire and what is your maximum profit in nominal terms when the price of the output is $12? In real terms? Note, this is when the wage is $120. g) (10 points) In the space below, draw two supply curves - redraw the supply curve from parte) above (with points A and B) and then add the new supply curve when wages are $120. Be sure to put all the shift variables in parentheses next to the two supply curves (like we did in class). Please label as point when the price is $10 and as point D when the price is $12. h) The final shock is a productivity shock in the happy direction where the marginal product of labor, the MPN, rises by 2 for EACH worker (we did this in class!). We go back to original conditions with wages (W)= $100. Please fill in the following Table (10 points). TABLE 3 (Note: W = $100) N Y MPN MRPN Marginal Profite Total Profit P= $10 P = $12 P=$10 P = $12 0 P= $10 P= S12 le 3 t 3 2 e e t e e e 4- 5 2 6 7 D) (5 points) How many workers will you hire and what is your maximum profit in nominal terms when the price of your output is $10? In real terms? Note, this is when the wage is $100. 1) (5 points) How many workers will you hire and what is your maximum profit in nominal terms when the price of the output is $12? In real terms? Note, this is when the wage is $100.- k) (10 points) In the space below, draw three supply curves - redraw the two supply curves from above (completely labeled with points ABC,D) and add the new supply curve given the productivity shock. Be sure to put all the shift variables in parentheses next to all three supply curves. On this third supply curve, please label as point E when the price is $10 and as point F when the price is $12. 1) (15 points) Suppose that the workers that are more productive ask for a raise since their increase in productivity was the reason your profits went up. Assuming that your output price is $10, calculate the number of workers that you would hire, your nominal profit, your real profit if you raised the nominal wage to S110 and compare to your answers in part a) above (assume you hire the worker even though you break even on them!). Are your answers consistent with the New Economy years in the mid to late 1990's? Be sure to refer to economic growth (what happened to Y?), unemployment rates, profits (stock market), real wages and government tax revenue - this question is worth 15 points