Consider the model of labor market equilibrium discussed in class. As- sume that jobs have all the same 8 hours/day shift, so labor supply choices happen only at the extensive margin. That is, workers only need to decide whether to work or not. Also assume that the product produced in this la- bor market is priced at the international markets - which makes the demand for the final good infinitely elastic -. Thus, changes in the labor market will not affect the price of the good being produced. The number of workers willing to supply labor evolves according to the following labor supply function: Where Is is the measure of workers willing to supply labor, w is the wage rate, and o is the labor supply elasticity. In the other side of the market, firms face the following production tech- nology: y = ALd. where A measures the productivity, Ly is the number of workers the firm is employing, and y is the total number of units of output that is produced. Firms maximize profits, which are the difference between revenues and costs: Profit = Revenues - Costs II = Pyy - whad, where II is the profit, w is the wage rate, and py is the price of the product produced in this labor market. This technology of production implies that marginal revenues are given by: Marginal Revenue = Opy A Firms hiring decisions are characterized by the following rule: Continue to increase hiring up to the point that the increase (marginal) in revenue brought by a worker is just high enough to cover his/her costs. In the absenceof labor market taxes, the marginal cost of a worker is given only by his/her wage. Thus, we have that firms choice of employment are characterized by: Marginal Revenue = Marginal Cost opyA LI-a dQuestion 4 Mandated Benefits The government decides to force firms to provide all of their employees with health insurance. The current equilibrium wage rate that prevails in the market is 80 dollars a day. The cost of health insurance is 20 dollars per worker per day. The worker's valuation, or willigness to pay for the health insurance is 15 dollars per day. a) Find the change in labor supply associated with this policy. b) Find the change in labor demand associated with this policy. c) Find the change in the equilibrium wage associated with this policy. d) Find the change in the cost per worker associated with this policy. e) Find the change in the worker's total compensation (wage and fringe benefits) associated with this policy. f) Now, assume that o = 0. Who bears the costs of providing the health insurance? g) Now, instead, assume that of = 0. Who bears the cost of providing health insurance