| Suppose a firm must employ 20 workers in order to produce 2000 units of output that the firm has contracted to supply to the government for $1.4 million. The firm must choose how much to invest in safety. The firm can choose any level of safety, S, from 0 to 100. The cost of safety is C(S) = 50S2. Given the firm’s choice of safety, it must pay an annual salary of 60,000 – 300S. Thus, a firm that chooses S = 30 pays $45,000 for this level of safety and pays each worker $51,000. What level of safety will the firm choose, and how much does this cost? How much will each worker earn? How much profit will the firm earn? |
