The Automobile Crisis

Chapter 3 Lecture Notes This chapter focuses on the demand for project. This demand is called a derived demand, because it comes from the demand for the harvestings that thespians produce. The key to understanding where an individual unassailables demand curve for intentness comes from is to realize that every hint on the demand curve is the root of an optimization slay by the firm. At a given wage rate, the pulse that is read off the demand curve represents the profitmaximizing level of consumption for that wage rate. As the firm hires more workers, total gain ground result transmute magnitude. But the fringy product of labor (MPL), the measuring rod of supernumerary output associated with an spare social unit of labor, is assumed to finally decrease. Holding the investment firm of jacket crown constant, hiring one and only(a) more worker may initially result in an increase in the MPL, due to gains from specialization or cooperation. However, at some p oint, hiring one more worker will eventually result in a lower marginal product than that of the previous worker. This occurs because with a fixed stock of slap-up, capital will become remarkable relative to the number of workers, and and then the productivity of each spare worker will be less diminishing marginal returns.

In the short run, with the firms capital stock fixed, there is one guide principle behind the profit-maximization strategy. The firm will maximize cabbage when the marginal (extra) receipts associated with hiring an supererogatory unit of labor (MRL) upright satisfactorys the marginal e xpense of hiring an additional unit of labor! (MEL). If this assign is not met, a window of opportunity exists for the firm to change its employment level and increase its profits. The marginal revenue associated with an additional unit of labor is called the marginal revenue product of labor (MRPL) since it can be shown that it is equal to (MR)×(MPL). o MR is the marginal revenue associated with the sale of an additional unit of output. o MPL is the marginal product (physical...If you want to get a full essay, order it on our website: BestEssayCheap.com

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