micro economic

Introduction to Microeconomics. Graphical Analysis. Profit Maximization and Labor Demand. Restaurants 1. Consider the short-run profit maximizing and labor demand decisions of a restaurant. On the graphs below, label the axes, the curves and the lines, indicate the profit maximizing level of output, the profit, and the optimal number of workers. Graph 1 Graph 2 2. Newly imposed health-related regulations will require restaurants to reduce the number of seats and to invest in equipment and technology that insures the safe preparation and serving of food. Show the effect of these measures on the short run profit maximizing decision of a typical restaurant. Assuming that the prices stays at the same level, on graph 1, show the new cost curves, the new profit maximizing level of output, and the new level of profit. The marginal cost shifts up/down. The profit maximizing level of output increases/decreases. Profit increases/decreases. 3. How do the new regulations affect the value of the marginal product and the values of the average product of a worker in a typical restaurant? How do they affect restaurants' demand for workers and the number of workers hired? On graph 2 show the new VMP and VAP curves. Assuming that wages do not change, indicate the new optimal number of workers. 4. Assuming that all restaurants face similar restrictions, at the industry level, the new regulations will affect supply/demand. Equilibrium price_ _ equilibrium quantity_ _ On graph 3, indicate the new supply/demand and the new equilibrium price and quantity. 5. Returning to the profit maximizing decision of a typical restaurant, on graph 4, show how the change in price will affect its profit maximizing level of output and its profit. Graph 3. Restaurant i Graph 4. Typical restaurant qe