The Effort of a Firm's Workers Depends on Their Real
The effort of a firm's workers depends on their real wage according to the following schedule. The marginal product of labor is MPN = E(400 - 4N)/30.
(a)What is the efficiency wage?
(b)How many workers will the firm hire?
(c)Suppose an adverse productivity shock reduces the marginal product of labor to MPN = E(360 - 4N)/30.How would your answers to parts (a)and (b)change?