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6. Suppose the hourly wage is $40, the price of each unit of capital is $50, and the price of output is S100 per unit. Assume that the firm cannot affect any of these prices. The production function of the firm is so that the marginal product of labor is If the current capital stock is fixed at 1,600 units, how many hours of labor should the firm hire in the short run (i.e., what should E be)? How much profit will the firm earn hint:remember that profit is just pricexoutput- wagexE-price of capitalxK)? (3 points total: 2 for the value of E and 1 for the profit) Now lets think about the long run in which the firm can freely choose both written asS . abor and Capital Based on the pro ucu on unen n. the margina protur fan a can If the firm is maximizing profits, what must the ratio of MPE tO MPx be? What must the ratio of E to K be? (2 points)

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