Bad Breath, Inc sells its output at $1 per unit into competitive markets. Bad Breath's factory is the only employer...

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Bad Breath, Inc sells its output at $1 per unit into competitive markets. Bad Breath's factory is the only employer or labor in Gilroy, California. It faces a supply from competitive workers of QL=w where QL is the number of workers hired per year and w is the annual wage. Each additional workers hired adds one less unit of output than was added by the previous worker. the 30,000th worker adds nothing to the total output. Bad Breath must pay all workers the same wage and, because it has to raise wages to get more labor, each additional worker costs the company 2QL dollars per year. to maximize profit how much labor should Bad Breath hire and what should it pay? Does efficiency prevail in the Gilroy labor market? If not, what is the size of the deadweight loss? you must use a diagram and show the appropriate values on it.
    • 8 years ago
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