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start from B i already have the answer to A 2. (23 points) A coffee shop attempts to hire a worker during a labour short-
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2. (23 points) A coffee shop attempts to hire a worker during a labour short- age. It knows that, if it posts a wage of $w per hour, then it can hire a worker to work for {=5w! hours. The coffee shop cannot post a wage below the minimum wage of $16 per hour but it also cannot hire the worker for over 45 hours. The shop chooses the quality k of its beans and takes as given the standard price of a latte p. All together, total profits are pukl - wi- which the coffee shop maximises by choosing its wage and coffee quality. a) (7 points) Formally write the constrained maximisation problem, as- sociated Lagrangian, and first order conditions. 2 b) (3 points) Under what circumstances will hiring the worker full time, i.e. t = 45, yield a valid critical point? c) 3 points) When will offering the minimum wage yield a valid critical point? d) (3 points) When will doing neither yield a valid critical point? e) (3 points) When will doing both yield a valid critical point? A) (2 points) Given p > 8, what is the optimum wage offering strategy? g) (2 points) Interpret your previous answers with an economic ratio- nalisation 2. (23 points) A coffee shop attempts to hire a worker during a labour short- age. It knows that, if it posts a wage of $w per hour, then it can hire a worker to work for {=5w! hours. The coffee shop cannot post a wage below the minimum wage of $16 per hour but it also cannot hire the worker for over 45 hours. The shop chooses the quality k of its beans and takes as given the standard price of a latte p. All together, total profits are pukl - wi- which the coffee shop maximises by choosing its wage and coffee quality. a) (7 points) Formally write the constrained maximisation problem, as- sociated Lagrangian, and first order conditions. 2 b) (3 points) Under what circumstances will hiring the worker full time, i.e. t = 45, yield a valid critical point? c) 3 points) When will offering the minimum wage yield a valid critical point? d) (3 points) When will doing neither yield a valid critical point? e) (3 points) When will doing both yield a valid critical point? A) (2 points) Given p > 8, what is the optimum wage offering strategy? g) (2 points) Interpret your previous answers with an economic ratio- nalisation i already have the answer to A
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