Suppose that the labor supply curve for a large university in a small town is given by w = 60 + 0.08L, where L is number of units of labor per week and w is the weekly wage paid per unit of labor.If the university is currently hiring 1,000 units of labor per week, the marginal cost of an additional unit of labor
A)equals the wage rate.
B)is twice the wage rate.
C)equals the wage rate plus $160.
D)equals the wage rate plus $80.
E)equals the wage rate plus $240.

Question

Quizplus · Accepted Answer

The marginal cost of an additional unit of labor is the derivative of the labor supply function with respect to L. Taking the derivative, we get MC = w + 0.08L. At 1,000 units of labor per week, we can plug in L = 1,000 to find MC = w + 0.08(1,000) = w + 80. Therefore, the marginal cost of an additional unit of labor is the wage rate plus $80, so the answer is D.

Suppose That the Labor Supply Curve for a Large University