Ms. Smith, the owner and manager of the Clear Duplicating Service located near a major university, is contemplating keeping her shop open after 4:00pm and until midnight. In order to do so, she would have to hire additional workers. She estimates that the additional workers would generate the following total output (where each unit of output refer to 100 pages duplicated). If the price of each unit of output is $10 and each worker hired must be paid $40 per day, how many workers should Ms. Smith hire?
Explain how an increase in the minimum wage affects the employment of unskilled workers. Ms. Smith should hire workers as long as their marginal revenue product (MRP) exceeds their marginal resource cost (MRC), and until MRP = MRC; MRP = MR*MP = P*MR = $10*MP and MRC = wages = $40.