7 Leadbelly Co. sells pencils in a perfectly competitive product market and hires workers in a perfectly competitive labour market. Assume that the market wage rate for workers is

$150 per day.

a What rule should Leadbelly follow to hire the profit-maximising amount of labour1 b At the profit-maximising level of output, the marginal product of the last worker hired is 30 boxes of pencils per day. Calculate the price of a box of pencils.

c Draw a diagram of the labour market for pencil workers (as in Figure 18.4) next to a diagram of the labour supply and demand for Leadbelly Co. (as in Figure 18.3). Label the equilibrium wage and quantity of labour for both the market and the firm. How are these diagrams related?