4. (40 points) The following table shows the total physical product of labor in the daily production of oil (in barrels per day) in Alaska and in Bakersfield, CA. The price of oil barrel ALASKA MPP BAKERSFIELD MRP 1 150 2 290 420 4 $40 5 650 6 750 7 840 8 920 310 810 1000 a) Complete the table above by computing the marginal physical product of labor and the marginal revenue product of labor in Alaska and in Bakersfield. In the same graph, draw the demand curves for labor in Alaska and in Bakersfield. How do they relate to one another? Why? Suppose that the per-unit price of labor is $3400 in Alaska and $3150 in Bakersfield. How much labor would be hired in Alaska and Bakersfield, respectively (assume that labor can be used in whole units only)? Explain your answer. The wage of oil workers is higher in Alaska than in Bakersfield. What is a likely explanation? Suppose that the price of oil increases. Illustrate in a graph how this would affect the demand for oil workers in Bakersfield. At a price of $3150, would the quantity of labor employed tend to increase or decrease? Valley Oil, a small oil company in Bakersfield, decides to hire its production workers on a long-term basis. As a result, it pays them an efficiency wage of $3500 instead of the market wage rate of $3150. Explain the efficiency-wage argument for why Valley Oil would want to pay its workers more than the market wage. Also, if all oil companies in Bakersfield followed Valley Oil's example and paid an efficiency wage, what would be the effect on the b) c) d) e) f) market equilibrium in the market for labor in oil production