The labor supply curve faced by a large firm in a small city is given by w = 160 + 0.02L, 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
A)equals the wage rate plus $40.
B)equals the wage rate plus $20.
C)equals the wage rate.
D)is twice the wage rate.
E)equals the wage rate plus $60.

Question

Quizplus · Accepted Answer

To find the marginal cost of a unit of labor to the firm, we need to take the derivative of the labor supply curve with respect to L.

d(F1F1F1S1)/dL = 160 - 0.04L

At L = 1000, the marginal cost of a unit of labor is:

160 - 0.04(1000) = $120

Therefore, the answer is B as the marginal cost of a unit of labor to the firm equals the wage rate plus $20.

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