Essay
Ms. Moneynickel operates a retail store in the local mall. The marginal product of labor at the mall is a function of employee effort level. The marginal product of employee effort is: Ms. Moneynickel can sell all the product she stocks for $20. Employees determine their effort level according to the function:
where
is the minimum wage. Currently, the minimum wage is $6. The marginal cost to Ms. Moneynickel of effort is:
What is the wage rate Ms. Moneynickel should offer her employees to maximize profits? If the minimum wage is increased by $1, how much should Ms. Moneynickel increase the wage rate paid to her employees?
Correct Answer:

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