This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Assume that an employer discovers that the marginal revenue product of the last two workers that he ... (Read 326 times)

09madisonrousseau09

  • Hero Member
  • *****
  • Posts: 559
on: Jun 29, 2018
Assume that an employer discovers that the marginal revenue product of the last two workers that he has hired is less than the wage rate that he is paying them.
 
  He is operating in a purely competitive market in both the output that he sells and the labor that he hires. What would you advise this employer to do and why?

Question 2

Explain why an employer in a perfectly competitive market will hire more workers when the marginal revenue product is greater than the wage.
 
  What will be an ideal response?


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

essyface1

  • Sr. Member
  • ****
  • Posts: 347
Reply #1 on: Jun 29, 2018
Answer to Question 1

It would be advisable if this employer laid off these two workers. The reason is that the wage rate in a competitive market is the same as the marginal cost of labor. Since these two workers are not paying their way laying them off will increase the profitability of the firm or lower its losses.

Answer to Question 2

The marginal revenue product represents the value of hiring the worker to the firm. It is the additional revenue that the firm gains from hiring the worker. If the gain is greater than the cost of hiring the worker (which is the wage in a competitive labor market), the firm will increase its profits by hiring the additional worker.


09madisonrousseau09

  • Member
  • Posts: 559
Reply 2 on: Jun 29, 2018
Great answer, keep it coming :)

Liamb2179

  • Member
  • Posts: 365
Reply 3 on: Yesterday
Excellent

« previous next »
 

Did you know?

More than 4.4billion prescriptions were dispensed within the United States in 2016.

Did you know?

According to the American College of Allergy, Asthma & Immunology, more than 50 million Americans have some kind of food allergy. Food allergies affect between 4 and 6% of children, and 4% of adults, according to the CDC. The most common food allergies include shellfish, peanuts, walnuts, fish, eggs, milk, and soy.

Did you know?

Excessive alcohol use costs the country approximately $235 billion every year.

Did you know?

Malaria was not eliminated in the United States until 1951. The term eliminated means that no new cases arise in a country for 3 years.

Did you know?

When Gabriel Fahrenheit invented the first mercury thermometer, he called "zero degrees" the lowest temperature he was able to attain with a mixture of ice and salt. For the upper point of his scale, he used 96°, which he measured as normal human body temperature (we know it to be 98.6° today because of more accurate thermometers).

Use the product rule to find derivative Use the product rule to find derivative
Find the two integers that have a sum of 20 and a maximum product Find the two integers that have a sum of 20 and a maximum product
Average real hourly wages (2010 dollars) by education level, full-time workers aged 17 to 34 in 2011 Average real hourly wages (2010 dollars) by education level, full-time workers aged 17 to 34 in 2011
Excel hardware is introducing a new product on a new product line of capacity 800 units per ... Excel hardware is introducing a new product on a new product line of capacity 800 units per ...
For the circuit in Figure 1, assume ideal diodes. The peak inverse voltage is approximately For the circuit in Figure 1, assume ideal diodes. The peak inverse voltage is approximately
The phenotype of an organism is the product of interactions The phenotype of an organism is the product of interactions
Video: Import of Dietary Glucose from Intestines to Bloodstream

For a complete list of videos, visit our video library