A worker has a marginal product of 15 units a day, each of which can be sold for $10. Is it profitable to hire this worker if the wage rate is $100 a day? Briefly explain your answer
What will be an ideal response?
It is profitable to hire this worker because the worker's value of marginal product is $150 a day (the price, $10, times the marginal product, 15 units), which exceeds the wage rate of $100 a day. The worker creates $150 more revenue for the firm at a cost of only $100. Hence it is profitable to hire this worker.
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One year ago, Ms. Case and Mr. Bond opened a jewelry store called T & J. They invested $1,000,000 of their savings into the partnership to buy equipment and initial inventory
They rented a building for $90,000 a year, and hired two employees for an annual wage of $40,000 each. Case and Bond believed that the best alternative investment of their money would be government bonds, which could yield an annual return of 8 percent. To run the store, Case quit her previous job, at which she earned $100,000, but her former boss told her that she was welcome to return anytime. Bond kept his job with the government, but gave up 6 hours of leisure each week (for 50 weeks), the time he used to spend playing golf. Bond used to say: "I'd only give up my golf time if someone paid me $100 an hour." During the first year of operation, T & J paid $20,000 for utilities and the firm's total revenue was $350,000. The market value of T & J's equipment was $200,000 at the beginning of the year and $170,000 at the end of the year. a) What is the economic depreciation of their capital? b) What are T & J's opportunity costs? c) What is the firm's economic profit in the first year of operation?
Inferior goods have an income elasticity of demand that is
a. positive b. negative c. 0 d. greater than 1 in absolute value e. equal to 1 in absolute value