Answer to Question #261125 in Microeconomics for outkarm

Question

XYZ Co. operates in a competitive market. Its Total Product (Q) is given as Q=f(L)= 2L, and it

takes the wage and price as given. Derive the firm's short-run demand for labor as a function of w

and p. How much labor will the firm hire if W=₵20 and P=₵100?

Answer 1

MP_L = W / p = w

MP_L=$\frac{w}{p}$ =w

MRP_L = w

MP_L $\times$ P = w

MP_L = 2L

P = 100

W = 20

3L  $\times$ 100 = 20

300L = 20

L = 0.0667

Q = 2L = 2 $\times$ 0.0667 = 0.133

Labor = 0.133

The firm will hire 0.133 labor