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)20L^-0.05. B)7.25L^-0.0⁵. C)20L^-1. D)7.25L^-1.

Question

Quizplus · Accepted Answer

The long-run labor demand curve for a competitive firm can be derived by equating the marginal product of labor (MPL) to the wage rate (w). In this case, MPL = L^-1 w = $7.25 per hour The output price (P) is not required to derive the long-run labor demand curve because the firm is assumed to be a price taker in a perfectly competitive market. Therefore, we can set MPL = w to get: L^-1 = 7.25 Solving for L (labor demand), we get: L = 20L^-1 Hence, option C is the correct answer.

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