Suppose the marginal product of labor is MPN = 200

Question

Suppose the marginal product of labor is MPN = 200 - 0.5N
Where N is aggregate employment.The aggregate quantity of labor supplied is 300 + 8w,where w is the real wage.What is the equilibrium quantity of employment?

Quizplus · Accepted Answer

In equilibrium, the marginal product of labor (MPN) equals the real wage (w). Setting MPN equal to the wage and solving for N gives us the equilibrium quantity of employment. MPN = 200 - 0.5N = w. The supply of labor is 300 + 8w. Setting these equal to each other and solving for N gives us the equilibrium quantity of employment, which is 380.