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The marginal product of labor for a certain firm is given by the following function MPN =A(502N) where A is productivity and N is the
The marginal product of labor for a certain firm is given by the following function MPN =A(502N)
where A is productivity and N is the total number of labor hours used in production. The price of output is $2 per unit.
(a) Assume that A = 0.5. What is the demand for labor if the nominal wage is $10?
(b) What if it is $20?
(c) Graph the demand curve for labor.
(d) If the firm optimally chooses to employ N = 10, what does that tell you about the value of the prevailing real wage?
(e) Repeat (a)-(d) if A = 1.5.
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