Describe the difference between a diminishing marginal product of labor and a negative marginal product of labor. Why would a profit-maximizing firm always choose to operate where the marginal product of labor is decreasing (but not negative)?
Diminishing marginal product of labor means that the last worker hired contributes less to the total output of the firm than the worker who was hired just previous to her. Negative marginal product of labor suggests that the last person hired actually causes total output of the firm to decline. The firm evaluates the benefit of hiring (added revenue) versus the added cost of hiring (wage). In competitive markets, the cost and benefit converge only when marginal product declines. If the marginal product of labor is negative, hiring an additional worker would actually decrease revenue. A profit-maximizing firm would never choose to operate where marginal product is rising because hiring an additional worker would increase the "value" a worker contributes to the firm, while costs remain constant. Thus, the firm will choose to operate where marginal product of labor is decreasing.
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The chaebols encouraged the Korean government to open up Korean financial markets to foreign capital. The Korean government responded by
A) allowing unlimited short-term foreign borrowing but maintained quantity restrictions on long-term foreign borrowing by financial institutions. B) allowing unlimited short-term and long-term foreign borrowing by financial institutions. C) maintaining quantity restrictions on short-term foreign borrowing but allowing unlimited long-term foreign borrowing by financial institutions. D) not allowing any foreign borrowing by financial institutions.
Which was not a way in which tariffs hurt the South?
a. Southern produced products lost US market share. b. The tariffs raised the price of imported goods to consumers. c. England had less money with which to purchase American made goods.