This topic contains a solution. Click here to go to the answer

Author Question: We showed above that a profit-maximizing firm will hire the number of workers such that the wage is ... (Read 124 times)

asan beg

  • Hero Member
  • *****
  • Posts: 570
We showed above that a profit-maximizing firm will hire the number of workers such that the wage is equal to the value of the marginal product of labor.
 
  But, as the text showed in an earlier chapter, a profit-maximizing firm will produce the quantity of output such that price equals marginal cost. Are these two rules inconsistent?

Question 2

Which of the following will not occur as the result of a decrease in net taxes?
 
  A) a shift to the left of the supply curve for loanable funds
  B) decreased government saving
  C) decreased household saving
  D) all of the above



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

mammy1697

  • Sr. Member
  • ****
  • Posts: 341
Answer to Question 1

No. To see this let p = price of output, MPL = marginal product of labor, w = wage rate, VMPL = value of the marginal product of labor, and MC = marginal cost. To see that there is no inconsistency, note the following:
i. Firms maximize profits by producing the level of output such that price equals marginal cost and therefore p = MC.
ii. Firms maximize profits by hiring the number of workers such the wage rate equals the value of the marginal product of labor and therefore w = VMPL.
iii. By definition the value of the marginal product equals the price of output times the marginal product of labor and therefore w = p x MPL, which implies p = w / MPL
iv. MC must equal w / MPL. If a firm wants to produce one more unit of output it would need to hire 1 / MPL additional workers. So, for example, if the MPL is 2 then a firm would have to hire half an additional worker to produce one more unit of output. The cost of these additional workers is w / MPL, which is the cost of producing one more unit of output.
v. Therefore if a firm follows the w = VMPL rule in its hiring decision it will also follow the p = MC rule in its output decision.

Answer to Question 2

C




asan beg

  • Member
  • Posts: 570
Reply 2 on: Jun 29, 2018
Wow, this really help


emsimon14

  • Member
  • Posts: 344
Reply 3 on: Yesterday
:D TYSM

 

Did you know?

Stroke kills people from all ethnic backgrounds, but the people at highest risk for fatal strokes are: black men, black women, Asian men, white men, and white women.

Did you know?

Vital signs (blood pressure, temperature, pulse rate, respiration rate) should be taken before any drug administration. Patients should be informed not to use tobacco or caffeine at least 30 minutes before their appointment.

Did you know?

The average office desk has 400 times more bacteria on it than a toilet.

Did you know?

Oxytocin is recommended only for pregnancies that have a medical reason for inducing labor (such as eclampsia) and is not recommended for elective procedures or for making the birthing process more convenient.

Did you know?

The use of salicylates dates back 2,500 years to Hippocrates's recommendation of willow bark (from which a salicylate is derived) as an aid to the pains of childbirth. However, overdosage of salicylates can harm body fluids, electrolytes, the CNS, the GI tract, the ears, the lungs, the blood, the liver, and the kidneys and cause coma or death.

For a complete list of videos, visit our video library