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If a firms production process is Q=0.8L2 -0.2L, and labor costs $95 per worker and output sells for $5, how much labor shoul
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Answer #1

Given,

Q=0.8L? – 0.2L

Labor costs=$95

Output sells for $5

We can find the labor the firm should hire by equating the marginal product of labor & real wage. Therefore, the amount of labor the firm should hire can be calculated using the below mentioned formula:

MPL =

MPL can be calculated as follows:

MPL =

Q=0.8L? – 0.2L

= 1.6L - 0.2 dL

1.6L - 0.2=

1.6L – 0.2 = 19

1.6L = 19 +0.2

1.6L = 19.2

L = 1.2 = 12

So, the firm should hire 12 labors.

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