00:01
So here we are trying to do our best for our firm, right? and the key here is we are in pure competition, right? and that's the crucial idea.
00:10
That means that the firm treats the wage like it's a price taker, right? so the wage is equal to 11 and that does not change.
00:21
So the goal is to maximize profit, which is the firm's idea, is you wanna set the wage equal to the marginal product of labor, right? and this is a very famous condition, right? the idea says, right, if the marginal product of labor is greater than the wage, you should hire more, right? if your workers are producing more value than it costs you to hire them, for example, imagine that your workers are producing $15 an hour, but you only have to pay them 11, you can hire more workers and make more profit because your workers are producing more value than you have to pay them.
00:57
And vice versa, right, in the reverse.
01:00
So here we have this table between units of labor, the total product, the price, and i'm gonna insert another thing here, marginal product.
01:12
So zero, one, two, three, four, five, and six.
01:19
Total product is zero, 15, 28, 39, 48, 55, and 60.
01:31
So the marginal product is hiring the first worker gets you plus 15, right? i'm looking at the difference.
01:37
13, 11, nine, seven, and five.
01:43
And now i'm gonna construct something called the value of the marginal product of labor.
01:48
The idea here is that this is in dollars, and so this needs to be in dollars as well, right? if you wanna make a fair comparison, both sides need to be in dollars...