Mr. Mullet runs a traveling carnival that hires local workers in each city it visits. 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 experiences in small and large cities.

i. He always paid the same wage in large cities ($9), but paid different wages in small cities ($6 or $12).

ii. 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 curves for labor are linear and parallel, with vertical intercepts of $18 (high demand) and $12 (low demand).

b. In the typical big city with high demand, profit is computed as. . . .

c. In the typical big city with low demand, profit is computed as. . . .

d. In the typical small city with high demand, profit is computed as. . . .

e. In the typical small city with low demand, profit is computed as. . . .

f. The expected profit is in a big city, compared to in a small city...