a) Consider a firm that sells its output in a perfectly competitive market product market, and hires labour in a perfectly competitive labour market. The value of the marginal product of labour (in dollars) is given by:

VMP_L = 30 - 2L

Assuming that the firm is a profit maximizer and can hire labour at $W per unit, derive its labour demand function.

b) 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:

L^D = 150 - 5W

The supply function of labour to this market is given by:

L^S = 10W

Solve for the equilibrium wage and level of employment in this market

c) In an effort to stimulate employment in this industry, the government offers firms a subsidy of $3 per unit of labour hired. Analyze the effects of the subsidy on the level of employment and the workers' wages.

d) The government's opposition parties accuse the government of catering to "corporate welfare bums" with the wage subsidy/handout. They suggest that the money would be better spent by putting 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. Evaluate the argument put forward by the opposition parties by comparing workers' employment and income (wages plus government bonus) to the scheme in part (c).