"In order for Charlie Trotter's, an upscale restaurant in Chicago, to maximize profit from the employment of chefs, the restaurant should hire chefs up to the point where the value of marginal product equals the wage rate for chefs"
Is the statement correct or incorrect?
The statement is correct. In order for any firm to maximize its profit, it hires workers until the wage rate equals the value of marginal product.
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In the efficiency wage model, an increase in productivity would
A) increase output but decrease the real wage. B) decrease the real wage but have no effect on output. C) increase output but have no effect on the real wage. D) have no effect on either output or the real wage.
The conditions for a valid instruments do not include the following:
A) each instrument must be uncorrelated with the error term. B) each one of the instrumental variables must be normally distributed. C) at least one of the instruments must enter the population regression of X on the Zs and the Ws. D) perfect multicollinearity between the predicted endogenous variables and the exogenous variables must be ruled out.