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Suppose a firm purchases labor in a competitive labor market and sells its product in a...

Suppose a firm purchases labor in a competitive labor market and sells its product in a competitive product market. The firm’s elasticity of demand for labor is 0.4. Suppose the wage increases by 5 percent. What will happen to the amount of labor hired by the firm? What will happen to the marginal productivity of the last worker hired by the firm?

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