What is the profit maximizing condition for the firm

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Reference no: EM13739719

The marginal product of labor (measured in units of output) for a certain firm is given by MPN = 249 – 2N. Note: N is the labor.

a. What is the profit maximizing condition for the firm when choosing the optimal level of labor? Write down the condition in REAL terms.

b. Suppose the Labor Supply Curve is given by Ns = 92 + 6w. (w is the real wage). Obtain the Equilibrium real wage and the equilibrium labor (i.e.Ns=Nd=N). Show work.

c. Suppose that there is an adverse oil supply shock. Show the impact that this has on the production function, the labor market (i.e. on equilibrium wage and labor), and on the actual amount of output. SHOW diagrams and DISCUSS your findings.

Reference no: EM13739719

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