a. The of labor is given by the following equation: 0 = 20 – , where L = number of workers. If the market wage is $5 per hour, how many workers will the employer want to hire?
b. The employer now finds that employees will work harder if they are paid a higher wage. If the wage rate paid the workers is at least $6 per hour, the higher productivity of labor is represented by the new marginal product of labor curve: 1 = 22 – . How many workers would the employer want to hire at $6 per hour?
c. Use economic theory to explain the change in employment levels associated with paying $6 instead of $5.