Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer.

Central Manufacturing Company is the only manufacturing facility in a small remote town, and Central Manufacturing Company is the only employer of machinists in the area. The graph below shows the market for machinists with the marginal factor (resource) cost curve, the labor supply curve, and the marginal revenue product curve.

(a) If the wage rate is $63, state whether there will be a shortage or a surplus of machinists and calculate its size.Show your work.

(b) Identify the profit-maximizing number of machinists. Explain using the labeling on the graph.

(c) Identify the profit-maximizing wage rate that Central Manufacturing Company will pay its machinists. Explain using the labeling on the graph.

(d) If the marginal product of machinists increases, what will happen to the quantity of output produced by Central Manufacturing Company? Explain.

(e) Assume instead that Central Manufacturing Company uses both labor and capital in producing widgets. The marginal product of the last unit of labor hired is 120 widgets per day and the marginal product of the last unit of capital rented is 150 widgets per day; the daily wage rate for labor is $40 and the daily rental price for capital is $30. To minimize the cost of producing its current level of output, should Central Manufacturing Company rent more capital, less capital, or the same amount of capital? Explain using marginal analysis.