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1. You are a newly hired manager of a small manufacturing plant in a rural area where highly skilled labor is in short supply, despite the fact that your plant currently pays its workers $15/hour. In order to alleviate the problem of skilled labor shortage at your plant, you are considering instituting an overtime plan, where workers earn $15/hour for the first 8-hour work-shift per day and $22.50 for each hour worked beyond the regular 8-hour work-shift. Alternatively, you are considering a $7.50 increase in hourly wage for every hour worked by employees. Either plan would eliminate your plant’s problem, as production and profit levels are up by 35% each. Applying the theory of worker’s income-leisure choice, graphically illustrate (
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