SCENARIO D In this final scenario we again return to our original conditions

Scenario d in this final scenario we again return to

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21. SCENARIO D - In this final scenario, we again return to our original conditions (from scenario A) and consider a positive productivity shock, just like we did in the lectures. In particular, let the MPLof each worker rise by two, due to an increase in total factor productivity (denoted A in the lecture), relative to the initial conditions. For question 21, fill in Table D. Each box is worth ½ point for a total of 15 points for Table D TABLE D- The wage is $150 and the price of output (Q) is $20. L Q MP L MRP Marginal Profit Total Profit 0 0 ----- ----- ----------- 0 1 8 10 $ 200 $ 50 $ 50 2 20 14 $ 280 $ 130 $ 180 3 28 10 $ 200 $ 50 $ 230 4 35 9 $ 180 $ 30 $ 260 5 41 8 $ 160 $ 10 $ 270 6 45 6 $ 120 $ -30 $ 240 Table for Individual Question Feedback Points Earned: 12.0/15.0
22. Use Scenario D/Table D to answer the questions 22 24 below.(3 points) The profit maximizing output is . Table for Individual Question Feedback Points Earned: 0.0/3.0
23. (3 points) The profit maximizing level of labor input is 5 workers. Table for Individual Question Feedback Points Earned: 3.0/3.0 Correct Answer(s): 5 24. (3 points) The maximum profit for this firm is 270 . Table for Individual Question Feedback Points Earned: 3.0/3.0 25. (3 points) Using Scenario D/Table D, go to Graph 1.Draw your new production function (remember technology [total factor productivity] increased, shifting the production function!) Label the new profit maximizing Q and L combination as point D. Point D should be along the new PF (PF') at point (5,51) Table for Individual Question Feedback Points Earned: 2.2/3.0 Correct Answer(s):
26. (3 points) Using Scenario D/Table D, go to Graph 5 and draw this firm’s new MRP curve (remember that MRP = P* MPL, and since MPL has changed, we know we have a new MRP curve!). Shade in the new area of profit. Also label the new profit maximizing point as letter D. Table for Individual Question Feedback Points Earned: 3.0/3.0 Correct Answer(s):

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