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Suppose an adverse productivity shock reduces the marginal

The effort of a firm's workers depends on their real wage according to the following schedule.

Real Wage Effort (E)

16 10

17 13

18 18

19 22

20 25

21 26

The marginal product of labor 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 labor to MPN = E(360 - 4N)/30. How would your answers to parts (a) and (b) change?

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