7. A firm has an incentive to hire more worker so long as the value of their mar

Question

7. A firm has an incentive to hire more worker so long as the value of their marginal product.

a. is greater than zero

b. is greater than or equal to the wage they would have to pay them

c. is less than the wage they would to pay them

d. is equal to the price of the good they are selling.

9. Suppose that there is no wage rigitiy, and new technology raises the productivity of labor. At the new equilibirum.

a. wages and employment will be higher

b. wages and employment will be lowe

c. wages will be higher and employer will be lowe

d. wages will be lower and employement will be higher

10. Suppose that there is no wage rigidity and that the government offers more generous unemployment benefits so that the cost of taking more to find a job is lower. At the new equilibrium:

a. wages and employment will be be higher.

b. wages and employment will be lower

c. wages will be higher and employement will be lower

d. wages will be lower and employer will be higher

Explanation / Answer

7. b. is greater than or equal to the wage they would have to pay them

Explanation: A competitive firm maximizes profit when its wage equals the value of marginal product of labor. When the wage becomes higher than the value of marginal product of labor, the profit diminishes. Therefore, the firm hires workers as long as the value of marginal product is greater than or equal to wage.

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