Suppose Woody Chuck's business is to clear trees for housing developments.Given the constraints of fixed capital,the production function is $q = .01 \sqrt { L }$ .Suppose Woody Chuck's is one of many firms clearing land and that the market price per cleared lot is $5000.(Note $M P _ { L } = \frac { .005 } { \sqrt { L } }$ )How many workers will Woody Chuck hire at w = 5?
A)1
B)4
C)16
D)25

Question

Quizplus · Accepted Answer

To find the optimal number of workers, set the marginal product of labor (MPL) times the price equal to the wage: $5000 \times \frac{.005}{\sqrt{L}} = 5$. Solving for $L$, we get $L = 25$.

Suppose Woody Chuck's Business Is to Clear Trees for Housing q=.01Lq = .01 \sqrt { L }q=.01L​

Suppose Woody Chuck's Business Is to Clear Trees for Housing $q = .01 \sqrt { L }$