3. Thales' labor market. Consider now the manufacturing town of Thales, North- ern Iowa. Thales is similar to Sophocles in many respects. It is located very far from any major metro area and each of the 2,500 inhabitants has individual sup- ply function S(w) = 16, for w E [1,10). The key difference is that there is one employer only in town, a fertilizer manufacturing plant owned by Hypergmo Inc. Hypergmo is price taker in the fertilizer market. Let p = 1 denote the price of fertilizer. The plant's production function is y = Al1/2, where A = 200 is total factor productivity and I is labor input. The minimum employment at the plant is l = 0.1, (a) Assume that Hypergmo behaves as a profit-maximizing monopsonist. What is Thales' wage and employment? (10 points) (b) The new governor of Northern Iowa was elected mostly because of her promise to institute a minimum wage of 3.42. What is the effect of such measure on wages and employment? What is the effect of the minimum wage on workers' and producers' surplus? (10 points) 3. Thales' labor market. Consider now the manufacturing town of Thales, North- ern Iowa. Thales is similar to Sophocles in many respects. It is located very far from any major metro area and each of the 2,500 inhabitants has individual sup- ply function S(w) = 16, for w E [1,10). The key difference is that there is one employer only in town, a fertilizer manufacturing plant owned by Hypergmo Inc. Hypergmo is price taker in the fertilizer market. Let p = 1 denote the price of fertilizer. The plant's production function is y = Al1/2, where A = 200 is total factor productivity and I is labor input. The minimum employment at the plant is l = 0.1, (a) Assume that Hypergmo behaves as a profit-maximizing monopsonist. What is Thales' wage and employment? (10 points) (b) The new governor of Northern Iowa was elected mostly because of her promise to institute a minimum wage of 3.42. What is the effect of such measure on wages and employment? What is the effect of the minimum wage on workers' and producers' surplus? (10 points)