Q19

Consider the case of a new firm that is maximizing profits over its first two years of production. In period 1, the real wage paid is W =$30,000, training costs for new workers are given by T=$2,000, and the value of marginal product is VMP=25,000. If the firm discounts second-period profits at r=0.05 and the value of marginal product of workers in period 2 is VMP2=$35,000, how much should the firm pay its employees in period 2 to maximize profits? $ Important note: Your answer needs to be written in decimal form and be rounded to 2 decimal places (e.g., 1.23). Any intermediate results should be rounded to at least 4 decimal places. Failure to do so may result in your answer not being accepted as a correct one. Consider the case of a new firm that is maximizing profits over its first two years of production. In period 1, the real wage paid is W =$30,000, training costs for new workers are given by T=$2,000, and the value of marginal product is VMP=25,000. If the firm discounts second-period profits at r=0.05 and the value of marginal product of workers in period 2 is VMP2=$35,000, how much should the firm pay its employees in period 2 to maximize profits? $ Important note: Your answer needs to be written in decimal form and be rounded to 2 decimal places (e.g., 1.23). Any intermediate results should be rounded to at least 4 decimal places. Failure to do so may result in your answer not being accepted as a correct one