Mr. Mullet’s Carnival Mr. Mullet runs a traveling carnival that hires local workers in each city it vis- its. The demand for carnival activities is uncertain, with low or high demand equally likely in any given city. At the end of the year, Mr. Mullet reviews his financial records and discovers some puzzling differences between his experi- ences in small and large cities. He always paid the same wage in large cities ($9), but paid different wages in small cities ($6 or $12). He always hired the same quantity of labor in small cities (20 workers), but different quantities in big cities (10 or 30 workers). a. Using Figure 3–3 as a model, illustrate with two graphs, one for the typical
4. Mr. Mullet’s Carnival
Mr. Mullet runs a traveling carnival that hires local workers in each city it vis- its. The
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He always paid the same wage in large cities ($9), but paid different wages in small cities ($6 or $12).
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He always hired the same quantity of labor in small cities (20 workers), but different quantities in big cities (10 or 30 workers).
a. Using Figure 3–3 as a model, illustrate with two graphs, one for the typical small city and one for the typical big city. Assume that the demand
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In the typical big city with high demand, profit is
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In the typical big city with low demand, profit is
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Inthetypicalsmallcitywithhighdemand,profitis
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In the typical small city with low demand, profit is
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The expected profit is in a big city, compared to
city.
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