Indiana Plant California

Quantity of workers Total Supplements Quantity of Workers Total Supplements

0 0 0 0

1 5000 1 10000

2 12000 2 21000

3 20000 3 31000

4 27000 4 38000

5 32000 5 44000

6 36000 6 46000

1. 38000 7 46000

1. Suppose the wage rate in California increases to $100,000.How many workers should it now hire in Plant Size A in both markets?
2. Suppose that the CEO of the company is really frustrated with the high wages in California and wants to shut down the plant.However, the company needs the same level of production as in letter c (for example, if total production was 80,000, the company still needs to produce 80,000). Should it shut down the plant in California and move all the workers to the plant in Indiana? Why or why not? Note that we are still in the short run and therefore constrained to be in plant size A.