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 66 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
Excellent

upturnedfurball

  • Member
  • Posts: 334
Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

« previous next »
 

Did you know?

Elderly adults are living longer, and causes of death are shifting. At the same time, autopsy rates are at or near their lowest in history.

Did you know?

According to the Migraine Research Foundation, migraines are the third most prevalent illness in the world. Women are most affected (18%), followed by children of both sexes (10%), and men (6%).

Did you know?

Lower drug doses for elderly patients should be used first, with titrations of the dose as tolerated to prevent unwanted drug-related pharmacodynamic effects.

Did you know?

Acetaminophen (Tylenol) in overdose can seriously damage the liver. It should never be taken by people who use alcohol heavily; it can result in severe liver damage and even a condition requiring a liver transplant.

Did you know?

There are over 65,000 known species of protozoa. About 10,000 species are parasitic.

In 1979 Islamic militants held American embassy workers hostage in Tehran. In 1979 Islamic militants held American embassy workers hostage in Tehran.
Workers at a Nike factory in Indonesia insert soles into sneakers for fourteen cents an hour. Workers at a Nike factory in Indonesia insert soles into sneakers for fourteen cents an hour.
States and territories that have adopted their own version of HAZWOPER for all workers are shown in ... States and territories that have adopted their own version of HAZWOPER for all workers are shown in ...
Overallocation of Labor to Farming When Farmworkers Are Paid Their Average Product Overallocation of Labor to Farming When Farmworkers Are Paid Their Average Product
Use the product rule to find derivative Use the product rule to find derivative
Find derivative using product rule Find derivative using product rule
Video: Phlebotomy

For a complete list of videos, visit our video library