Suppose that all workers place a value on their leisure of 40 goods per day. The production function relating output per day Y to the number of people working per day N is
Y = 200N - N^2and the marginal product of labor is
MPN = 200 - 2N.
A 20% tax is levied on wages. Output per day would be
a. 9,375.
b. 11,250.
c. 7,250.
d. 5,625.
Answer: A
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