1. A firm identifies the following relationship between the real wage it pays and the effort made by workers:

Real Wage Effort 2 1 3 6 4 17 5 22 6 27 7 28 The marginal product of labor for this firm is

( ) = − MPN E N 60 27 , where E is the effort level and N is the number of workers employed. If the firm can pay only one of the wage levels shown above, which should it choose?

How many workers will it employ? If the firm launches a morale boosting plan and the effort exerted by workers increases by 10 at the given wage level, will the firm stay at the same wage level as before?

How many workers will it employ after the plan?