The labor supply curve faced by a large firm in a small city is given by w = 60

Question

The labor supply curve faced by a large firm in a small city is given by w = 60 + 0.08L, where L is the number of units of labor per week hired by the large firm and w is the weekly wage rate that it pays. If the firm is currently hiring 1,000 units of labor per week, then the marginal cost of a unit of labor to the firm

a. is twice the wage rate.

b. equals the wage rate.

c. equals the wage rate plus $160

d. equals the wage rate plus $80

e. equals the wage rate plus $240.

(Please explain or show work. I already know the answer, just want to know how to solve it)

Explanation / Answer

w = 60 + 0.08L

If the firm is currently hiring 1,000 units of labor per week,then L=1000

w=60+0.08*1000

w=60+80=140

wage rate=140

total cost incurred to the firm(total wage bill)=wL=60L+0.08L2

marginal cost=d(total cost)/dL=60+0.16L

since L in this case is 1,000 units so

Marginal cost of a unit of labor to the firm is 60+0.16*1000=60+160=220

ans d) equals the wage rate plus $80

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.