XYZ Co operates in a competitive market. Its marginal product of labor is 1/L, and it takes the wage and price as given. Derive the firm's short-run demand for labor as a function of w and p. How much labor will the firm hire if w = 2 and p = 10?
What will be an ideal response?
Setting w = p ? MPL yields w = p/L or L = p/w. At w = 2 and p = 10, the firm hires
5 units of labor.
Economics
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