Question: Optimal labor allocation in the short run requires that marginal revenue product equal the marginal cost of the variable input. When labor is the variable

Optimal labor allocation in the short run requires that marginal revenue product equal the marginal

cost of the variable input. When labor is the variable factor, optimal allocation => MP =

Suppose that a firm produces output that can be sold at $1200, using the following production function

= 1/21/2 (therefore, the marginal product of labor P = 1

2 1/21/2). Assuming that capital is

fixed at 1 unit in the short run, how many labor units should the firm employ to maximize profits if the

wage rate is $200?

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