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Course of producing its output, this firm causes pollution

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In the course of producing its output, this firm causes pollution. The government passes a law that requires the firm to stop polluting, and the firm discovers that it can prevent the pollution by hiring 0.2 workers for every worker that is producing output. Let N denote the amount of labor in production. The total employment at the firm is 1.2N. Cost of hiring a production worker includes both his wage and the wage of the worker who cleans after him, hence is 1.2w. Determine the effect of the pollution regulation on the firms profit-maximizing choice of labor input.

Reference no: EM132136901

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