If barbers in Mexico are just a productive as their counterparts in the United States then why do they earn lower wages?
What will be an ideal response?
The reason is that productivity alone does not determine earnings. Productivity times the price that consumers are willing to pay does. This is what is referred to as the marginal revenue product. In Mexico the ability and willingness to pay for a haircut is lower than it is in the United States. That translates into a lower marginal revenue product and lower wages as well.
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If the demand is ________, a fall in price ________ total revenue
A) elastic; increases B) elastic; decreases C) inelastic; increases D) inelastic; does not change
Taxes
A. are mandatory payments. B. are necessary for financing government expenditures. C. do not directly relate to the benefit of government goods and services received. D. all of these answer options are correct.
What is one reason activists might lobby the government to force firms to produce more output than they normally would in a perfectly competitive market?
A) They value consumer surplus more than producer surplus. B) They value producer surplus more than consumer surplus. C) They seek to avoid future regulation. D) They seek to minimize total surplus.
Related to the Economics in Practice on page 302: A pair of shoes at a local department store has a marked retail price of $80. These shoes are on a sale table where all items are priced at 25 percent off the retail price. The store is also having a promotion of an additional 25 percent off all sale-priced shoes. Based on these stackable discounts, what is the actual selling price of these shoes?
A. $25 B. $40 C. $45 D. $60