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Why is demand for labor curve downward sloping?
I believe in economics we assume that firms are rational and because of this a rational firm would not employ additional labor if it caused a decline in the total output of the firm.
A firm will only employ additional workers to what point?
When the marginal gains from hiring that employee are less than the cost of the employee. I.e. if the employee costs $40,000, but the firm only nets $30,000, that employee will not be hired. _____ Theoretically, when the value produced by that worker, or their return on investment isn't high enough... but that gets mixed up with a lot of political stuff plus a desire to make money without regard to improvement of the product, so sometimes the resultant value isn't even factored in. Spending is just frozen unless it inhibits the decision-maker's personal goals.
Until when does a profit maximizing firm use additional units of resources for production?
Until it reaches the point of diminishing returns. After that point, one additional unit of resources cannot be used profitably.
What is the relationship between marginal revenue and marginal cost in determining the optimal level of production for a firm?
The relationship between marginal revenue and marginal cost in determining the optimal level of production for a firm is that the firm should produce at a level where marginal revenue equals marginal cost. This is because at this point, the firm maximizes its profits by balancing the additional revenue gained from producing one more unit with the additional cost of producing that unit.
Why monopsonist hires fewer workers than a firm in competitive labor market?
A monopsonist hires fewer workers than a firm in a competitive labor market because it is the sole buyer of labor, giving it greater market power to set wages. Unlike competitive firms that accept the market wage, a monopsonist must raise wages to attract additional workers, leading to higher marginal costs for hiring. As a result, the monopsonist will hire workers up to the point where the marginal cost of labor equals the marginal revenue product, which typically occurs at a lower quantity of employment compared to competitive firms. This results in a lower overall employment level in the monopsonistic market.
How do companies determine wages for employees?
By the equilibrium between supply and demand for workers
Why is demand for labor curve downward sloping?
I believe in economics we assume that firms are rational and because of this a rational firm would not employ additional labor if it caused a decline in the total output of the firm.
A firm will only employ additional workers to what point?
When the marginal gains from hiring that employee are less than the cost of the employee. I.e. if the employee costs $40,000, but the firm only nets $30,000, that employee will not be hired. _____ Theoretically, when the value produced by that worker, or their return on investment isn't high enough... but that gets mixed up with a lot of political stuff plus a desire to make money without regard to improvement of the product, so sometimes the resultant value isn't even factored in. Spending is just frozen unless it inhibits the decision-maker's personal goals.
Until when does a profit maximizing firm use additional units of resources for production?
Until it reaches the point of diminishing returns. After that point, one additional unit of resources cannot be used profitably.
What can happen if the MRP is greater then a firm's MC?
The firm can afford to hire more workers
What can happen if the MRP is greater than a firm's MC?
The firm can afford to hire more workers.
What is the relationship between marginal revenue and marginal cost in determining the optimal level of production for a firm?
The relationship between marginal revenue and marginal cost in determining the optimal level of production for a firm is that the firm should produce at a level where marginal revenue equals marginal cost. This is because at this point, the firm maximizes its profits by balancing the additional revenue gained from producing one more unit with the additional cost of producing that unit.
Why monopsonist hires fewer workers than a firm in competitive labor market?
A monopsonist hires fewer workers than a firm in a competitive labor market because it is the sole buyer of labor, giving it greater market power to set wages. Unlike competitive firms that accept the market wage, a monopsonist must raise wages to attract additional workers, leading to higher marginal costs for hiring. As a result, the monopsonist will hire workers up to the point where the marginal cost of labor equals the marginal revenue product, which typically occurs at a lower quantity of employment compared to competitive firms. This results in a lower overall employment level in the monopsonistic market.
What is the additional revenue that accrues to a firm when an additional worker is hired?
marginal revenue product
Is it wise for firm to employ a worker at 20 per hour when another worker does the same job for 10 per hour?
There may be many reasons for it - some good, some bad and some in between: One of them is the owner's relative; The higher paid worker is more skilled (or faster); The two workers may be in different locations - with different employment rates and costs of living (that is the whole point of multinationals sourcing overseas!). The firm may have to justify its decision to anti-discriminatory agencies.
How does specialization by workers benefit the firm's employing them?
Workers who specialize become more efficient and thereby increase productivity.
Why is the profit maximizing point when MRMC?
The profit-maximizing point occurs when marginal revenue (MR) equals marginal cost (MC) because at this point, the additional revenue gained from selling one more unit is equal to the additional cost of producing that unit. This ensures that the firm is maximizing its profits by producing the optimal quantity of goods or services.
