ECON 2300 Lecture Notes - Lecture 21: Real Wages, Competitive Equilibrium, Capital Accumulation
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Suppose that in a competitive output market, firms hire labor from a competitive labor market (so that the profit maximization conditions for hiring labor are as we discussed in class). The firm has a fixed number of machines and can produce the following quantities (Q) associated with the number of workers (L) in a given time period.
L | Q |
0 | 0 |
1 | 10 |
2 | 18 |
3 | 24 |
4 | 28 |
5 | 30 |
The market price of the good this firm sells is $5. If the firm pays a wage of w = $19 per time period, then how many units of labor should this firm hire to maximize profit?
3 |
1 |
2 |
4 |
5 |