Suppose the market for autoworkers is initially in equilibrium, but then the automakers purchase capital goods that are a substitute for workers. What happens in the market for autoworkers? Explain. Now, suppose the automakers improve working conditions
at the plants. What are the effects? Explain.
What will be an ideal response?
The purchase of capital that is a substitute for labor causes the demand for autoworkers to fall. Fewer workers are hired and the wage rate falls. When the firms make the workplace better, the supply of autoworkers increases, causing an increase in quantity demanded and a further lowering of the wage rate. Whether more or less workers are hired than before both changes occur depends on which effect was greater.
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Christine works as a receptionist in an office. She is not supposed to use the Wi-Fi connection provided by the company to access social-networking Web sites
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A perfectly competitive firm will minimize its losses by shutting down when:
A) P < AVC at the profit-maximizing level of output. B) P < ATC at the profit-maximizing level of output. C) P < MC at the profit-maximizing level of output. D) P < TFC at the profit-maximizing level of output.