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 DTABLE 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
$
$
$
2
$
$
$
3
$
$
$
4
$
$
$
5
$
$
$
6
$
$
$
10
10
200
50
50
24
14
280
130
180
34
10
200
50
230
43
9
180
30
260
51
8
160
10
270
57
6
120
-30
240

Table for Individual Question Feedback
Points Earned:
15.0/15.0

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:
3.0/3.0
23.(3 points) The profit maximizing level of labor input is workers.
Table for Individual Question Feedback
Points Earned:
3.0/3.0
24.(3 points) The maximum profit for this firm is
.
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.
Table for Individual Question Feedback
Points Earned:
3.0/3.0
51
5

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):