Why does a firm maximize its profits by hiring so that VMP = W?
What will be an ideal response?
The VMP represents the additional revenue generated by the last worker. The wage is the cost of the last worker. If VMP > W, then an additional worker adds more to revenue than to cost and so hiring the worker boosts the firm's profit. Conversely, if VMP < W, then decreasing labor reduces costs more than it reduces revenue and thereby decreasing the quantity of labor it employs raises the firm's profit. Only when VMP = W can no other level of labor create a greater profit.
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Answer the following statement true (T) or false (F)
A Swiss consumer wants to buy an American car. The exchange rate is 1USD=0.89CHF (Swiss Francs). The car costs $10,000 . How much would the car cost him in Swiss Francs?
a. 12,000 Francs b. 11,600Francs c. 8,900 Francs d. 7,500 Francs
If a man marries his hired housekeeper, the value of GDP:
a. rises. b. falls. c. is unchanged. d. rises, but the value of GDP falls.
Under a gold standard, a discovery of gold will
a. decrease the general price level. b. increase the general price level. c. cause increased unemployment. d. cause decreased rates of economic growth.