1. Suppose Bob owns a pizza place in a competitive market. If an additional worker will cost Bob $200 and offers marginal productivity of 40 pizzas, what is the marginal cost of producing a pizza? Show your work and explain your reasoning.
2. Consider the market for managers. Assume the opportunity cost of earning the MBA decreases for many people. Let’s assume it typically takes about two years to complete the MBA, so what happens to the equilibrium wage for managers in two years other things equal? Draw a picture use it to explain your reasoning.