A firm faces a perfectly elastic demand for its output at a price of $6 per unit of output. The firm, however, faces an upward-sloped labor supply curve ofE = 20w - 120where E is the number of workers hired each hour and w is the hourly wage rate. Thus, the firm faces an upward-sloped marginal cost of labor curve ofMCE = 6 + 0.1EEach hour of labor produces five units of output. How many workers should the firm hire each hour to maximize profits? What wage will the firm pay? What are the firm’s hourly profits?
A firm faces a perfectly elastic demand for its output at a price of $6 per unit of output. The firm, however, faces an upward-sloped labor supply curve ofE = 20w - 120where E is the number of workers hired each hour and w is the hourly wage rate. Thus, the firm faces an upward-sloped marginal cost of labor curve ofMCE = 6 + 0.1EEach hour of labor produces five units of output. How many workers should the firm hire each hour to maximize profits? What wage will the firm pay? What are the firm’s hourly profits?
Chapter11: The Firm: Production And Costs
Section: Chapter Questions
Problem 15P
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A firm faces a perfectly
E = 20w - 120
where E is the number of workers hired each hour and w is the hourly wage rate. Thus, the firm faces an upward-sloped marginal cost of labor curve of
MCE = 6 + 0.1E
Each hour of labor produces five units of output. How many workers should the firm hire each hour to maximize profits? What wage will the firm pay? What are the firm’s hourly profits?
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