Suppose that all workers place a value on their leisure of 40 goods per day.The production function relating output per day Y to the number of people working per day N is Y = 200N - N²
And the marginal product of labor is
MPN = 200 - 2N.
A 20% tax is levied on wages.Output per day would be

Question

Quizplus · Accepted Answer

To find the optimal number of workers, set the marginal product of labor equal to the value of leisure: 200 - 2N = 40. Solving gives N = 80. The output is Y = 200(80) - 80^2 = 9,375. The tax does not affect the output calculation.

Suppose That All Workers Place a Value on Their Leisure