Firm that excavates roadside ditches to lay drainpipe

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Dirt Diggers (DD) is a firm that excavates roadside ditches to lay drainpipe. Its output follows the production function: Q = 10L − 0.1L 2 , where L denotes labor hours and Q the length of the ditch in meters. The marginal product of labor is MPL = 10 − 0.2L The firm hires labor at a wage of $12 per hour. A) Should DD accept an offer to excavate 250 meters for a price of $500? Explain. B) Suppose DD from question 1 is offered as much or as little excavation work as it desires at a price of $2.00 per meter. Should it accept this offer and what will it produce if it does?

Reference no: EM13897020

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