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Unformatted text preview: o 2. Additional output is sold additional money marginal revenue What is MC to firm from hiring one additional worker? o For now, competition assumption: o Firm takes market input price (i.e. wage rate) as given Combine MB (MRP) + MC (input price- wage rate) Firms optimal hiring decision: input at which MRP=input price (labor: MRP=wage rate) See: consumer MU=P firm MR=MC What if wage changes? Here, comp. firm in input market: labor D curve is MRP curve o Downward-sloping factor D curve Market factor D curve is horiz. Sum of indiv. Firm factor D curves Supply of Labor: worker trades off income + leisure...
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- Fall '08