Question
Assume that a firm is considering whether to hire an additional employee. The firm has a 2-period (year) time horizon with a certain amount of
Assume that a firm is considering whether to hire an additional employee. The firm has a 2-period (year) time horizon with a certain amount of fixed hiring costs in the first period (i.e., period 0). Given the information below, determine the post-hiring wage that the firm pays in period 1 so that it equates the present [discounted] value of marginal labor cost and marginal revenue product. Graph your results Hiring (initial) Wage (period 0)$15,000 Hiring costs MRP initially (period 0) MRPi post-hiring period "discount rate" -$8,000 - $10,000 - $30,000 - 5% b.Revise your results from above using a 3-period time horizon for the firm (i.e, t- 0,1, 2). Assume the post-hiring MRP is constant, as is the post-hiring wage (i.e., MRP1 MPR2, and W1 W2). Graph your results. Are your revised results consistent with the implications of the quasi-fixed labor cost model? Explain
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