Clarke Mementos Manufactures Small Figurines That They Sell to Retailers

Essay

Clarke Mementos manufactures small figurines that they sell to retailers around the country. Clarke sells the figurines for $5.00 each, a price the firm considers given. Clarke's production function is given by the expression:
Q = 60L - 0.5L²,
where Q = number of figurines per day, and L = number of skilled workers per day. Based on this production function, the average and marginal products of labor are as follows:
AP = 60 - 0.5L MP = 60 - L
a. Write an expression for the firm's marginal revenue product.
b. Clarke currently pays $150 per day (including fringe benefits) for each of its skilled workers. How many workers should the firm employ?
c. Clarke's workers are highly skilled artisans with a great deal of job mobility. The firm's managers fear that they must increase the workers' total compensation to $200 per day to remain competitive. What impact would the wage increase have upon the firm's employment?