Consider the market for labor where both firms and workers are price takers. Output is produced using capital and labor. The marginal product of labor can be described by: 200 – 4L, where L is the number of workers hired. The price of the good produced is 5 per unit. a. Illustrate the demand for labor. Be sure to note the specific value of the vertical intercept. b. Suppose that the competitive firm must pay 100 for each worker. Determine the number of workers hired. (Determine the total income to capital. Show your work for both parts. c. Suppose that the price of the good rises but that the wage remains the same. Illustrate how the optimal choice of labor would change. No need to do the explicit calculation; just show the outcome and briefly explain.
Consider the market for labor where both firms and workers are price takers. Output is produced using capital and labor.
The marginal product of labor can be described by: 200 – 4L, where L is the number of workers hired. The price of the good produced is 5 per unit.
a. Illustrate the
b. Suppose that the competitive firm must pay 100 for each worker. Determine the number of workers hired. (Determine the total income to capital. Show your work for both parts.
c. Suppose that the price of the good rises but that the wage remains the same. Illustrate how the optimal choice of labor would change. No need to do the explicit calculation; just show the outcome and briefly explain.
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