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A profit-maximizing firm faces the following options for hiring workers:
a) Assume the firm has limited space so that it can only hire one worker. Which type of employee should the firm hire?
b) Assume the firm can rent additional space so that it can employ two employees at a yearly rate of €25,000. Should the firm rent the additional space? If yes, which type of employee should the firm hire?
Total Cost (TC) This is the sum of fixed costs and variable costs i.e. TC = FC + VC.
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Model Specification We proceed with the model specification in the following steps. 1) The economy is composed of competitive firms (F in number) and identical workers
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