Suppose a firm overpays its workers at the start of the job, and then the firm slowly lowers wages over time until eventually the firm pays the workers considerably less than the worker's marginal product of labor. What prevents this "reverse of a delayed-compensation scheme" from being implemented?
A. The firm would need to enforce a mandatory retirement age, which is illegal in the United States.
B. Workers would leave the job as soon as the firm tried to pay the worker less than his or her value of marginal product.
C. Workers prefer wages to increase over time.
D. The workers would never have an incentive to invest in general training.
E. The firm would fire the worker as soon as the worker's value of marginal product exceeded the worker's wage.
Answer: B
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If the marginal utility of each good a consumer buys does not diminish but remains constant, we should see consumers
a. buying no goods at all b. spending all of their income on the good with the highest marginal utility c. buying one unit of each good d. buying only the least expensive good e. leaving the store in total confusion
Tucker Corporation sells its product for $5.00 . Tucker's industrial engineers have informed management that hiring one additional worker will increase output by five units per hour. Tucker should hire the additional worker only if the wage rate is:
a. $5.00 or less per hour. b. $1.00 or more per hour. c. $25.00 or less per hour. d. none of these.
Which of the following is not a reason for international trade?
a. Differences in resource endowments b. Diseconomies of Scale c. Differences in tastes d. All of the above are reasons for international trade.
The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
At what output does the firm reach minimum average variable cost?
A. 8,000 B. 6,000 C. 100 D. 7,400 E. 600