Suppose that the labor supply curve for a large university in a small town is given by w = 160 + 0.03L, where L is number of units of labor per week and w is the weekly wage paid per unit of labor.If the university is currently hiring 1,000 units of labor per week, the marginal cost of an additional unit of labor
A)equals the wage rate.
B)is twice the wage rate.
C)equals the wage rate plus $60.
D)equals the wage rate plus $30.
E)equals the wage rate plus $90.

Question

Quizplus · Accepted Answer

To find the marginal cost of an additional unit of labor, we need to first take the derivative of the labor supply function:

dS/dL = 160 + 0.06L

Plugging in L = 1000 (since the university is currently hiring 1000 units of labor per week), we get:

dS/dL = 160 + 0.06(1000) = 220

The marginal cost is equal to the wage rate plus the derivative of the labor supply function:

MC = w + dS/dL

Plugging in w = F1F1F10 160 and dS/dL = 220, we get:

MC = F1F1F10 160 + 220 = F1F1F10 190

Therefore, the marginal cost of an additional unit of labor is $190, which is equal to the wage rate plus $30. So the correct answer is D, "equals the wage rate plus $30".

Suppose That the Labor Supply Curve for a Large University