Answer questions 2 and 3 please and step by step like a, b,c, d etc
2. {5 points} Production. Lorde pays $3500 a month to rent her restaurant and uses equipment that she rents another $1000/month. Ingredients cost $5.93 a serving for the first six servings but she has to pay a premium for additional materials, $7.72 for servings 6-11 and $10 for servings beyond that. (Note that she does not pay any premium on the first five servings even ifshe makes more servings than that!} (Note that she signed a lease and pays the rent regardless ofhow many dinners she serves; note that regardless ofhow much ingredients she buys for additional servings, she pays $5.93 for the ingredients for the first 5.) She hires workers at $15 each and nds that they produce servings according to the following schedule: Servings MU coq au Total Workers vin 1 $22.00 0.05 2 $21.25 I). 10 3 $20.25 0.20 4 $19.25 0.32 5 517.75 0.47 6 516.25 0.66 7 514.75 0.92 8 $13.25 1.29 9 $11.75 1.81 10 $10.25 2.53 11 $8.75 3.54 12 $7.25 4.95 13 $5.75 6.94 14 $4.25 9.71 a. (1 point) Calculate and graph the additional workers needed for each serving. (Use a spreadsheet!) What is happening to the marginal productivity oflabor as more is produced and more workers are hired? Marginal productivity is going up. b. (2 points) Calculate and graph the marginal cost of each serving. (Use a spreadsheet so we can see how you made your calculations!) Why does the MC curve have the slope (up, down= or at) that it does? What happens to the slope of the MC curve as Lorde produces more and more servings? Why? c. (1 point) Calculate and graph the marginal cost of each serving if workers unionize and gain a raise to $ZU/hour, with no change in productivity. What happens if they work harder: becoming more productive so each serving can be made with only 75% as much labor (at the old wage}. (Include a copy of your spreadsheet so your TA can check your calculations.) d. (1 point) Calculate the marginal cost of each serving at higher productivity am! the higher wages. Compare the results of high wages and high productivity with the initial situation. Which would you prefer as an employer? Which would you prefer as a worker? Which is better for society? 3. {5 points} Perfect competition and equilibrium. a. (1 point) Put the demand and supply curves together (at the original productivity and wages). Lorde believes that she is in a perfectly competitive market. How many servings will she sell? At what price'? In a perfectly competitive market. the demand and supply curves intersect at the equilibrium price. where the quantity demanded equals the quantity supplied. To determine how many servings Lorde will sell and at what price, we would need more specic information about the demand and supply curves, including the quantities supplied and demanded at different prices. Without this information. we cannot provide exact quantities and prices. b. (2 points) Draw the graph again and shade in the entire area of consumer surplus. Shade in the entire area of producer surplus. c. (2 points) Calculate consumer surplus as the sum ofthe difference between the marginal utility and the price for each serving up to the last sold. Calculate producer surplus as the sum of the difference between price and marginal cost for each sewing. What is the dollar value of consumer surplus? What is the dollar value of the producer surplus? What is the dollar value of the total social surplus
