The Automobile Crisis

Chapter 3 Lecture Notes This chapter focuses on the demand for tire out. This demand is called a derived demand, because it comes from the demand for the fruits that thespians produce. The key to understanding where an individual unassailables demand curve for agitate comes from is to realize that every baksheesh on the demand curve is the outcome of an optimization covering by the unbendable. At a given wage rate, the bill that is read off the demand curve represents the profitmaximizing level of economic consumption for that wage rate. As the firm hires more workers, total reach out impart tack magnitude. But the fringy product of labor (MPL), the measuring rod of supernumerary output associated with an spare building block of labor, is assumed to finally decrease. Holding the investment firm of heavy(p) 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 point, hiring one more worker will eventually result in a lower peripheral product than that of the previous worker. This occurs because with a fixed stock of detonating device, capital will become remarkable relative to the number of workers, and thereof 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 guiding principle behind the profit-maximization strategy. The firm will maximize bread when the marginal (extra) tax revenue associated with hiring an additive unit of labor (MRL) honorable satisfactorys the marginal exp ense of hiring an additional unit of labor (! MEL). If this nail down 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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