Why does a profit-maximizing firm hire labor up to the point where the value of marginal product equals the wage rate?
What will be an ideal response?
If a company stopped adding workers at the point where the wage rate was less than the value of marginal product of labor, the firm could hire more workers and its profit would increase. Why? Because the return from the workers, the value of marginal product, exceeds the cost of hiring the workers. Since the marginal product of labor decreases as more workers are employed, as more workers are added, the marginal product of labor and hence the value of marginal product decreases. Eventually the firm will reach the point at which the value of marginal product equals the wage rate. If still more workers are employed, then the wage the firm must pay the workers exceeds the value of marginal product. These workers would contribute losses to the firm. So only when the value of marginal product equals the wage rate can the firm not increase its profit by changing the quantity of workers it employs.
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Why would making a permanent change in a monetary aggregate have an effect on exchange rates in a nation?
a. Permanent rates are mostly set by short-run fluctuations in the rate of interest caused by monetary instability. b. A permanent change is never quite as permanent as policy makers claim-people form expectations on past performance rather than declarations. c. The central bank is always aware of the effect on exchange rates as it formulates policy, so it is very careful to make small permanent changes that have no effect on exchange rates. d. Traders form expectations of future exchange rates based on the anticipated long-run effects of monetary operations
The decisions Apple makes in determining production levels for its iPhone is an example of a microeconomic topic
Indicate whether the statement is true or false