In the long run,a competitive firm has a marginal product of labor,MPL = L⁻¹.The output price is $20 per unit and the wage is $7.25 per hour.The long-run labor demand curve for the firm is
A) 20 L⁻⁰.⁰⁵.
B) 7.25L⁻⁰.⁰⁵.
C) 20L⁻¹
D) 7.25L⁻¹.

Question

Quizplus · Accepted Answer

In the long run, a competitive firm hires labor until the value of the marginal product of labor (VMPL) equals the wage. VMPL is calculated as price times MPL, which is 20 * L⁻¹. Setting this equal to the wage of $7.25 gives the labor demand curve as 20L⁻¹.

In the Long Run,a Competitive Firm Has a Marginal Product