Math homework

Problem:

Suppose a firm hiring from a competitive labor market has the marginal revenue product schedule as given in the first two columns of the table below:

a. If this firm can hire labor competitively at a wage of $16, how many workers will it hire? Alternatively, suppose the firm has monopsony power such that it must pay $6 to hire the first worker and must increase the wage rate by $2 to attract each successive worker, as shown in the third column of the table above.

b. What is the total labor cost of hiring one worker? Of two workers? What is the marginal labor cost of the second worker?

c. What is the total labor cost of hiring three workers? What is the marginal labor cost of the third worker? Fill in the remainder of the final two columns.

d. What level of employment maximizes this firm's profit?

e. What wage rate will the firm pay to attract the profit-maximizing number of workers? Compare this outcome with that in part a.