Essay
Mr.Barnes operates a power plant in the local market.His marginal revenue of average employee effort level is: MR(e)= 25 - e.The marginal cost of effort to Mr.Barnes is:
MC(e)= w.Employees set their effort level according to: e = 
,where 
is the average wage at all other jobs in the local market.Currently,this average is $7.50.If Mr.Barnes pays a wage rate of $7.50,is he maximizing profits? If not,what wage rate should Mr.Barnes pay?
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If Mr.Barnes sets the wage rate to $7.50...View Answer
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