0
Why does the profit maximizing rule still apply when firms decide how many workers to hire?
Wiki User
∙ 12y ago
Firms will continue to hire workers so long as one additional worker is able to make the firm an additional unit of profit. A competitive firm pays a wage that is equal to the marginal product of labour. Example: suppose hiring one more worker results in an increase in output of 1 unit. Now suppose that unit can be sold for $1 and that there are no other variable costs (think software.... nearly costless to produce once it has been created). What is the wage that the worker receives? The firm would be willing to hire the worker and pay them any wage that was less than or equal to $1.
This is the same as the profit maximization rule. You would continue to hire workers until the last dollar spent on wages was exactly equal to the last dollar earned in sales (ie. zero profits). This is the exact same idea as profit maximization. If you can make 1 widget and it costs 80 cents and the you sell it for $1, you make 20 cents profit. The next widget you make costs 90 cents and you sell it for $1 to make 10 cents profit. The next widget you can make for 95 cents.... and so on. You will continue to make widgets so long as you are making money. The same goes for labour. You will continue to hire workers so long as the make you money. You will stop hiring additional workers when the marginal product of labour is equal to wages.
Wiki User
∙ 12y ago
Add your answer:
Earn +20 pts
Does the economic principle apply to non-profit seeking businesses as it does to profit seeking businesses?
yes
What do you understand as a business ethics and why is necessary apply it?
business ethics means tactics applied for more profit we have to apply business ethics to earn more money
What is the profit maximization model?
Making decision based on profit maximsation focus on accounting income and may be manipulated as it tends to focus on the short term, it can therefore be regarded as too simplistic as it does not consider cash flows, is biased towards short run returns and ignores the relative riskiness of the alternative.
What statement does not apply to high aggregate demand?
the concern is that unemployment may increase because fewer workers are needed.
How can you apply economics im your daily allowance?
How do you apply economics in your household?
Does the economic principle apply to non-profit seeking businesses as it does to profit seeking businesses?
yes
Do you need employees to apply for a grant for your non profit?
no you do not
How to apply for a grant for a 503K non profit?
What is available?
How do you apply for non profit organization project to Home Depot?
Provide documentation of your status as a registered non-profit organization.
How do you file your taxes if you are on workers compensation?
Workers compensation should send you a form that you will apply to your tax returns.
Where would place a fulcrum of a lever if you had to lify a heavy load?
A fulcrum would be placed as close to the heavy load as possible. This minimizes the lever arm (and thus minimizes the torque) for the load while maximizing the lever arm (and thus maximizing the torque) for the force you must apply.
What made you decide to apply as a Barista?
Betty be hearty soon
How do you oil a lesly organ speaker?
step 1 : apply oilstep 2 : profit
How do you apply Potters model to the profit versus public health case study?
nothing.
How does someone go about starting a non profit organization?
To start a non profit organization assuming you have a unique idea and the means to finance the startup you must apply with your government to register your company and apply for a tax exemption status then register with the government and finally you need to apply for charity status with your local government.
How does one apply for a non profit consolidation?
A non profit consolidation can be applied for by going to a company that is funded by donations or grants that offers this. They will consider if someone is eligible and offer the non profit consolidation loan to them if they are eligible.
Do you do you decide to apply to medical school?
Yes....if you want to go to medical school.....??
