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(Challenging) Draw a Firm's Labour Demand Curve That Intersects the Vertical

question 22

Essay

(Challenging) Draw a firm's labour demand curve that intersects the vertical axis at $20 per hour, and choose a point on the curve corresponding to an hourly wage of $12 and employment of 50 workers.
a. Explain the significance of the labour demand curve, and show why such a curve is downward sloping.
b. At the employment level of 50 workers, what is the total amount the employer pays in wages?
c. At the employment level of 50 workers, what is the firm's profit? (Hint: At each level of employment, the labour demand curve shows the additional value of production created by hiring an extra worker.)


Definitions:

Sales

The exchange of goods or services for money, quantifying the performance and profitability of a business.

Operating Assets

Assets that are used for the day-to-day operations of a business, contributing to its ability to generate revenue.

Return On Investment

A measure of the financial gain or loss on an investment relative to the amount of money invested, usually expressed as a percentage.

Contribution Margin Ratio

The ratio of contribution margin (sales minus variable costs) to sales revenue, indicating the percentage of each sales dollar available to cover fixed costs and profit.

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