A Firm Calculates That the Marginal Product of Labor (MPL)

question 8

Essay

A firm calculates that the marginal product of labor (MPL) can be found from the following equation:
MPL = 35 − 2L
where L is the number of workers hired.
The production function for this firm is as follows:
Q = 35L − L²
The firm knows it can find profits with the following equation:
Profit = P × Q − W × L
where P stands for the selling price of the good, Q stands for total output, and W represents the wage. Price is equal to $1.
a. If the wage is $11, how many workers will the firm hire? How much profit will it earn?
b. Compare this level of profits to those earned by the firm if it hired one fewer worker than L* and one worker more than L* to demonstrate that L* workers generate the most profit for the firm.

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