Suppose that a firm is producing in the short run with output given by: Q =...

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Suppose that a firm is producing in the short run with output given by: Q = 50L - 50L? The firm hires labor at a wage of $50

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Answer 1

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A firm maximizes profit by producing at

MRPL=wage

MPL=dQ/dL=50-L ............. by first differentiation of the function

MRPL=MPL*price=(50-L)*10=500-10L

equating to wage

500-10L=50

10L=450

L=45

the firm should hire 45 labors to maximize profit.

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Answer 2

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