Question 2 Waltons is a new cookie company. The firm hires local college students to sell cookies door-to-door in higher income neighborhoods. Each of these "Sales Associates" sells cookies, which increases Candice's Cookies' total revenue, but must be paid an hourly wage. The graph below depicts demand for labor curve when the retail price of a cookie is $2 Hourly Wage 540 Port (i): Suppose that the retail price of a cookie is $2. What is the marginal product of the 4th Sales Associate? $60/$2 = 30 - Marginal Product with 2 Sales Associates $50/2 = 25 cookies - Marginal Product with 4 sales Associates Port (i): Suppose that the retail price of a cookie is $2. What is the marginal product of the 6th Sales Associate? Answer: $40/52 = 20 cookies - Marginal Product with 6 Sales Associates. Port (ill): Suppose that the retail price of a cookie is 52. What is the marginal product of the 8th Sales Associate? $30 /$2 = 15 cookies - Marginal Product with & Sales Associates Port (iv): Suppose that the retail price of a cookie falls to $1.50, but that the sales associates' marginal products are not affected. Construct the new demand for labor curve. Answer: MP 30 x $1.50 = $45.00 MP 25 x $1.50 = $37.50 MP 20 x $1.50 = $30.00 MP 15 x $1.50 = $22.50 $70 D J.-.-.. ...;........................f.... ... ...!..... Hourly Wage ....-.. ... ........;-...... ....f....... ...... . ... ... .;. $60 -.... ............... f-..-.-........-...... ....;... .. $50 ..pooch.......... ..............f-.. ... .... . $40 -!. .-- -3. .. . .;..-.;-. . ... j... . .......... . -.. .-.... ...3...4....... ... ......-....&.... ... &. ... . $30 -.. .. . . .- -. . . . .. ... ?-.-..4. .-. ... .... ... ...;. $20 -. . .. .-. .p. .-.b-.. . .. .. . . . ....... .... ...!. ..-!... . .... $10 ..go.-..-.. ..... . ..... ... .......... ... ...-;.-. .. 8 10 12 14 Number of Sales Associates Part (v): Complete this sentence: As the price of the good being produced falls, the demand for labor decreases (decreases; increases). If the wage is unchanged, fewer (fewer; more) workers will be hired