Question

3. Consider the advertisement industry, where firms use models (workers) to shoot adver- tisements. Each model works for only one firm. Each worker (model) comes in with a different hair style, which can be divided into 24 types. In other words, the hair style wheel is like a 24- hour clock. Each firm enters the market and makes one advertisement. Each advertisement has a specific requirement for hair style. If a model's hair style does not match the advertisement's requirement, the model must spend money redoing the model's hair in order to close the gap. The cost of re-styling is $2 for each unit of hair style shift. For example, to go from style #3 to style #2, the cost is $2; to go from style #5 to style #2, the cost is $6. Each advertisement requires two models. There are two cities in the region: Smallville has 4 models and Bigburg has 12. The gross wage for each model is $50. Assume that models are evenly distributed around the hair style wheel. Compute the net wage for models in each of the two cities. Show steps for partial credit. (10 pts)

Answer 1

Answer:

Net wage for models in each of the cities: