Merlin is like all other managers in a perfectly competitive industry except in one respect: Because of his great sense of humor, people are willing to work for him for half the going wage rate. All other firms in the industry have short- run total cost curves given by

STCQ = M + 10Q wQ2 (see footnote 16),

Where M is the salary paid to ordinary managers and w is the going wage rate for the industry. If all firms in the industry face an output price of 28, and if w = 2, how much more will Merlin be paid than the other managers in the industry?

  • CreatedDecember 12, 2014
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