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Suppose a firm's cost of hiring another worker is $150. The firm pays an hourly wage of $10 to all workers. Each additional worker adds
Suppose a firm's cost of hiring another worker is $150. The firm pays an hourly wage of $10 to all workers. Each additional worker adds 100 units to total production, holding constant capital and average hours per worker. If a current worker works an additional hour, holding constant capital and the number of employees, total production increases by 8. The firm faces diminishing marginal returns to workers and to hours per worker.
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