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Is the marginal benefit of hiring an additional

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is the marginal benefit of hiring an additional labour-day, measured in physical units (kgs) of output, and the right side is the marginal cost, measured in physi- cal units (kgs) of output. That is, if the firm pays a worker $40/labour-day, then at $2.50/kg this is equivalent to paying her 40/2.5 = 16 kg/labour-day. (b) If P X and P L both double, then the right side of the equation = P L / P X = 80 / 5 = 16 kg/labour-day, as before, and so there is no change in the equilibrium: the firm should hire 24 labour-days each period. (c) If P X doubles with P L constant, then P L / P X = 40 / 5 = 8 kg/labour-day, and the firm should hire 32 labour-days each period. (d) If P L doubles with P X constant, then P L / P X = 80 / 2.50 = 32 kg/labour-day, and the firm should hire 8 labour-days each period. M4-2 MATH MODULE 4: SOLUTIONS TO EXERCISES MP L , P L /P X (kg/L-day) L (L-days) 40 d a = b c 2.5 = 32 2.5 = 5 = 16 40 = 8 8 24 32 40 80 40 80 5 C A = B D MP L = 40 – L
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