Economan has been infected by the monopolistic competitive

Question # 00665841 Posted By: dr.tony Updated on: 03/28/2018 11:55 AM Due on: 03/28/2018
Subject Economics Topic Microeconomics Tutorials:
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Economan has been infected by the monopolistic competitive bug. He takes over the Friendly Space Trooper Agency (FSTA) and makes it the only sweet deal available in the galaxy. The only variable input he employs is labor. He is currently producing 150 units of super-duper Trooper service and selling them for $20 apiece. He is considering the possibility of hiring an additional full-time employee. Economan estimates that daily output would increase to 160 units if he hired this additional person and that he would be able to sell all of those units at a price of $19 each.


What is the MRP of labor equal to in this situation? Assuming that Economan takes the price of labor as a given, what is the maximum daily wage that would make it in his best interest to hire this additional employee? (Economan needs to have you explain your answer to him fully to award you full credit and a chance to be an honorary space cadet in the FSTA. Points are given for attempting to blast off.)

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