The Effort of a Firm's Workers Depends on Their Real

Essay

The effort of a firm's workers depends on their real wage according to the following schedule: $$\begin{array} { c c } \text { Real wage } & \text { Effort } ( E ) \\\hline 16 & 10 \\17 & 13 \\18 & 18 \\19 & 22 \\20 & 25 \\21 & 26 \\\hline\end{array}$$ The marginal product of labour is MPN = E(400 - 4N)/30.
a. What is the efficiency wage?
b. How many workers will the firm hire?
c. Suppose an adverse productivity shock reduces the marginal product of labour to
MPN = E(360 - 4N)/30. How would your answers to parts (a) and (b) change?