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 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
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