Question Labour is a variable input into the production process. In this sense, a change in the amount of labour used in production (the number of employee hours) lead to a proportionate change in labour costs. However, some other labour-related costs may also occur. a) Define "quasi-fixed costs" and give three examples of them.

b) Assume a t-period of setting. Write down the mathematical expression that describes the profit-maximizing employment rule of a firm when there exist quasi-fixed costs. Explain what this expression means.

c) Consider a firm that only exists for one period. The value of labour's (L) marginal product is given by =, where P is the price of output, and = 100.5. The wage rate is $10. Assume that there are no hiring or training costs. If the firm expects the price of output to be $10, what is the optimal level of employment? If the firm hires these workers, but then finds out that the price of output is $5, what will the firm do?

Hint: If there is only one period, the number of periods becomes "1", and we do not need to discount future values into present values.

d) Assume now that there are hiring and training costs of $20 per worker. If the firm expects the price of output to be $10, what is the optimal level of employment? How does this compare to your answer in Part c)? If the firm hires these workers but then finds out that the price of output is $5, what will the firm do? What if the price is $2? Explain.