5. [4 points] Instead of part (d), suppose that ArcTeryx is not successful in lobby- ing the government. Show that using the original production function (given by (1)), a reduction in the wage could help offset some of the negative employment impact in part (c). Question 3 [20 points] 1. [4 points] Consider a firm that sells its output in a perfectly competitive product market, and hires labour in a perfectly competitive labour market.' The value of the marginal product of labour (in dollars) is given by V MP, = 30 - 2L. Assuming that the firm is a profit maximizer and can hire labour at $ per unit, derive its labour demand function. 2. [4 points] Given that there are 10 identical firms (like the firm described in part (a)) in the industry, show that the market labour demand is given by LP = 150 - 5W. 3. [4 points] The supply function of labour to this market is given by LS = 10W. Solve for the equilibrium wage and the level of employment in this market. Rep- resent the equilibrium graphically and carefully label your diagram. 4. [4 points] In an effort to stimulate employment in this industry, the govern- ment offers firms a subsidy of $3 per unit of labour hired. Analzye the effects of the subsidy on the level of employment and the workers' wages. Represent this situation graphically and carefully label your diagram. 5. [4 points] The government's opposition parties accuse the government of cater- ing to "corporate welfare bums" with the wage subsidy. They suggest that the money would be better spent by putting the money directly into the hands of the workers. They propose that the government should directly give workers an additional $3 for each unit of labour worked. Compute the equilibrium wage and employment level that would prevail under this policy. Evaluate the argument put forward by the opposition parties by comparing workers' employment and income to the scheme in part (4). Support you argumentation with a carefully labelled diagram