Question 1 (45 Points) Blue Skies Skydiving

You are the owner of Blue Skies Skydiving, a school and drop zone ("DZ" in the lingo) where those with no skydiving experience can learn how to skydive and get through the Advanced Free Fall (AFF) portion of their training in a single day, which is seven total skydives. To earn an A-license more skydives are required, but the AFF portion is what is needed before a student can solo.

The only inputs you need to execute the course are instructors (two per student) and parachute sets. An airplane and pilot are also required, but the plane and pilot are needed anyway for the other skydivers so students essentially "free ride" (haha - get it? A little econ humour). Each parachute set is composed of a main rig (with backup), helmet, goggles, altimeter, and jumpsuit. You calculated that the cost of the parachute set is $60/set/day. On a given day, two instructors can only teach the AFF course to one student, and only one student can use a parachute set.

Each instructor charges a monthly salary of US$2,250 and works 15 days a month (they really like skydiving, so they have to balance "fun time" with "work time"). Assume that each month has 30 days and that you have found a way to perfectly balance instructors among days so that you can offer the AFF course every day of the month.

(10 points) Draw a graph showing your expansion path, isocost and isoquant curves on any given day.

(10 points) Calculate the optimal number of active skydiving instructors on each given day if your demand is infinite but you only have access to 12 parachute sets. Explain.

(10 points) Due to the pandemic, some DZs have shut down. Because of the positive Yelp ratings for your school, quite a few instructors have come to work for you, which has resulted in a one-third reduction in the instructors' salary. On a new graph, draw your new expansion path, isocost, and isoquant curves. Explain what happens.

(15 points) During the summer season, the longer days allow each instructor set to teach two students every day. However, you decide not to pay any additional salary to the instructors. On a new graph, draw your isocost and isoquant curves and explain how your profits are affected.