A firm currently employs 40 production workers and 5 supervisors. The marginal product of the last production worker employed is 60 units of output per hour and production workers are paid $8 per hour. The marginal product of the last supervisor employed is 120 units of output per hour and supervisors are paid $20 per hour. Every employee works 40 hours per week.

 

a) What is the firm's total labor cost per week?

b) Assume that the firm's isoquants are smooth curves and that labor hours can be varied continuously. Is the firm producing the maximum level of output given its current level of cost? Explain why or why not. If it isn't, explain what it should do to increase output.

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a Calculate the firms total labor cost per week Production workers Number of workers 40 Wage per hou... View the full answer