A pizza shop's marginal product of labor, measured as the number of pizzas delivered per week, is MP_l = 55 - 5L, where L is the number of workers. The current average price of a pizza in this highly competitive market is $10. The shop, a monopsonist, faces labor supply of W = 100 + 40l, where W is the wage per week and L is the number of workers. The pizza shop will hire ____ workers when the price of a pizza is $10.

Question

Quizplus · Accepted Answer

The profit-maximizing condition for a monopsonist is MR = MC. In this case, MR = P = $10 and MC = W/MP_l. Substituting the given equations, we get:10 = (100 + 40L)/(55 - 5L)Solving for L, we get:L = 3.46Therefore, the pizza shop will hire 3.46 workers when the price of a pizza is $10.

A Pizza Shop's Marginal Product of Labor, Measured as the Number