Assume that the labor supply curve to a firm is the one given in Problem 1. If the firm’s marginal revenue product (MRP_L) = 240 - 2E, what is the profit-maximizing level of employment (E*), and what is the wage level (W*) the firm would have to pay to obtain E* workers?

Problem 1

Suppose a firm’s labor supply curve is E = 5W, where W is the hourly wage.

a. Solve for the hourly wage that must be paid to attract a given number of workers

(E) to the firm.

b. Express the total hourly labor cost associated with any given level of employment.

c. Express the marginal expense of labor

(MEL) incurred when hiring an additional worker.