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Question In the short run, labor is the only variable factor used by a firm. The manager of the firm has estimated that the marginal product of labor is given by MPL = B/ (L+a)0.5 (that is, the denominator of MPL is the square root of L+a), where B and a are positive numbers. The hourly wage is w no matter how many units of L are used, and each unit of output can be sold in a competitive market at a market price P. If the firm uses an optimal amount of labor, then an increase in P A) Decreases the optimal (profit-maximizing) amount of labor used. B) Increases the wage the firm has to pay to the workers. C) Increases the optimal (profit-maximizing) amount of labor used. D) Has no effect on the optimal (profit-maximizing) amount of labor used

/in /by

Question

In the short run, labor is the only variable factor used by a firm. The manager of the firm has estimated that the

marginal product of labor is given by MPL = B/ (L+a)0.5 (that is, the denominator of MPL is the square root of L+a), where B and a are positive numbers. The hourly wage is w no matter how many units of L are used, and each unit of output can be sold in a competitive market at a market price P. If the firm uses an optimal amount of labor, then an increase in P

A) Decreases the optimal (profit-maximizing) amount of labor used.

B) Increases the wage the firm has to pay to the workers.

C) Increases the optimal (profit-maximizing) amount of labor used.

D) Has no effect on the optimal (profit-maximizing) amount of labor used

 
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