Question
In: Economics
Suppose that the marginal product of labor is: MP = 100 – L, where L is the number of workers hired.
Suppose that the marginal product of labor is: MP = 100 – L, where L is the number of workers hired. You can sell the product in the marketplace for $50 per unit and the wage rate for labor is $100. How many workers should you hire?
Solutions
Expert Solution
The output profit-maximizing condition for the use of labor is :
p * MP = w
where p = price of the output = $50
MP = Marginal product of labor = 100 - L
w = wage rate for labor = $100
So by the condition :
50 * (100 - L) = 100
100 - L = 100/50 = 2
100 - L = 2
L = 100 - 2 = 98
Answer : In order to profit maximize they should hire 98 workers.
Rahul Sunny answered 2 years agoRelated Solutions
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--
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Suppose a firm's marginal product of capital and marginal product of labor schedules are as shown...
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respectively. Its output is sold in a competitive market for $.50
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Capital
MP of Capital
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MP of Labor
0
0
1
10
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28
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9
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30
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24
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20
5
6
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16
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12
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If the price of the item is $10.00 per unit and the
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to maximize their profit?
Two employees
Three employees
Four employees
One employee
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