Some commentators will argue that increases in productivity may have no effect or even a negative effect on employment in the short run. Explain what must occur for an increase in productivity to have no effect or even a negative effect on employment in short run
What will be an ideal response?
An increase in productivity will have no effect on employment if the percentage change in output equals the percentage change in productivity. Employment will fall if the percentage change in output is less than the percentage change in productivity. This can be seen from Y = AN which implies that N = Y/A.
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In the long run, firms in a competitive market make zero economic profit. This induces most firms to leave the industry
Indicate whether the statement is true or false
The "gang system" is an example of:
a. specialization and division of labor. b. diminishing marginal product. c. the envelope theorem. d. Gresham's law.
In 2003, the largest component of U.S. national income was
a. compensation of employees b. rental income c. proprietor's income d. farm income e. corporate profit
The firm's short-run costs contain
A) only variable costs. B) only fixed costs. C) both variable and fixed costs. D) only opportunity costs.