A firm identifies the following relationship between the real wage it pays and the effort exerted by its workers:
Real Wage Effort
The marginal product of labor for this firm is
MPN = E(100 - N) / 15
Where E is the effort level and N is the number of workers employed. If the firm can pay only one of the six wage levels shown, which should it choose? How many workers will it employ?
There are 200 workers in the town where the firm is located, all willing to work at a real wage of 8. Does this fact change your answer to the first part of this question? If so, how?
The figure (attached) shows an increasing function, i.e., the higher wage rate, the more effort.
Assuming the firm's product market is perfectly competitive, and the price of the product is exogenous (a constant decided by the market). By marginal product theory, workers are paid by how much they produce, i.e., W ...
Real Wage Effort is depicted.
Labor, capital, & inputs & outputs
This is a 4 part question:
A manufacturer is hiring 20 units of labor and 6 units of capital (bundleA). The price of labor is $10 and the price of capital is $2 and at A the marginal products of labor and capital are both equal to 20.
1.Beginning at A if the manufacturer increases labor by 1 unit and decreases capital by 1 unit, what will happen to cost and output?
Cost remain constant & output rises by 20 units
Cost remain constant & output lowers by 20 units
Output remains constant & cost increase by $8
Output remains constant & cost lowers by $8
Both cost and output remain constant
2.Beginning at A, if the manufacturer raises expenses on labor by $1 and lowers expenses on capital by $1, which is True?
Output per $ spent will rise
Output per $ spent will lower
MP of labor will eventually rise and MP of capital will eventually fall
MP of labor will eventually rise and MP of capital will remain constant
Or none of these
is using optimal combination of capital and labor
should use more labor and less capital
should use more capital and less labor
need more information to determine
MPL will be less than 20
MPK will be more than 20
MPL will be 5 times MPK
Or the first 2 listed above