A perfectly competitive firm has a MPL = 22-L. If P = 5 and w = $10/hr:
(a) What is the optimal quantity of labor demanded?
The optimal level is reached with the MRP of labor is equal to the wage. The MRP is equal to the MPL x P. Thus our equation is:
(22-L)P = 10
Using 5 for P and solving for L:
110 - 5L = 10
100 = 5L
L = 20
Thus the optimal level of employees is 20.
Overseas, the wage tends to be lower. ...
Solution Summary
Optimal level of employees, outsourcing, education, and lazy workers
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