Suppose the firm is operating at a perfectly competitive market. The firm recently invested $10,000 in new machinery. Each unit produced cost $10 and…

Suppose the firm is operating at a perfectly competitive market. The firm recently invested $10,000 in new machinery. Each unit produced cost $10 and the market price is $20.

(a) How many units will the firm produce?

(b) [a bit of a stretch question] Now suppose that each unit still costs $10 and each worker is compensated $10/hr. How many units will the firm produce? Note: there is no definite answer. You may choose to use any technique you want. Credit is based on explanation.

a) The units produced to cover the costs involved will be;TR=TC20*Q= 10,000+10Q20Q=10,000+10Q10Q=10,000Q= 1,000b) Here, compensation increases the morale of the workers, therefore if they are…

 
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