Firm purchases labor in competitive domestic labor market

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Suppose a firm purchases labor in a competitive domestic labor market and sells its product in a competitive international product market that covers the whole world. Domestic producers represent a small portion of the world market and have no influence on the product price. The firm's elasticity of demand for labor is −0.5. Suppose the wage increases by 6 percent. What will happen to the number of workers hired by the firm? What will happen to the marginal productivity of the last worker hired by the firm? Explain.

Reference no: EM131073793

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