Suppose an executive has a choice between two salary compensation packages. One guarantees him an income of $250,000 a year
The other would give allow him to earn an extra $50,000 a year if profits rise by 2% but receive a pay cut of $50,000 f they don't. Let's assume that there is a 50% chance that the profits could rise by 2% or more and a 50% chance that they won't. Explain why he might accept the $250,000 guaranteed salary. What would have to be true for him to accept the second salary compensation package?
Workers, like consumers, make choices not to maximize income per se but to maximize their utility levels. If the law of diminishing marginal utility holds as economists expect then the extra-added utility that he would receive from the $50,000 increase in income might be less than the expected utility that he would enjoy if he lost the $50,000 . What would have to be true for him to accept the second salary compensation method is if the utility lost was less than the utility gained.
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The first table above gives the labor demand and labor supply schedules for a nation. The second table gives its production function
a. What are the equilibrium real wage rate and the level of employment? b. What is potential GDP?
Coal is required to make steel. Hence, the price elasticity of demand for coal by steel manufacturers will be
A) unit elastic. B) inelastic. C) elastic. D) perfectly elastic.
When demand is elastic
A) price and revenue move in opposite directions. B) price and revenue are not related. C) price and quantity demanded move in opposite directions. D) price and revenue move in the same direction.
The higher a country's tax rates, the more likely that country will be
a. at the top of the Laffer curve. b. on the positively sloped part of the Laffer curve. c. on the negatively sloped part of the Laffer curve. d. experiencing small deadweight losses.