The labor supply curve faced by a large firm in a small city is given by w = 60 + 0.05L, where L is the number of units of labor per week hired by the large firm and w is the weekly wage rate that it pays. If the firm is currently hiring 1,000 units of labor per week, then the marginal cost of a unit of labor to the firm

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Quizplus · Accepted Answer

The marginal cost of labor is the derivative of the total cost with respect to labor, which is the wage rate plus the change in wage rate per additional unit of labor. Here, MC = w + 0.05L = 60 + 0.05(1000) + 0.05(1000) = 110, which is $50 more than the wage rate of $60 + 0.05(1000) = $110.

The Labor Supply Curve Faced by a Large Firm in a Small