Asked by Yahya Jabado on Jul 19, 2024
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Your boss is trying to decide whether to buy out a rival company and asks for your advice.The boss says that she will buy the rival if there is evidence that the rival is operating inefficiently.(Your company will then improve its efficiency and increase profits. )She will not buy the rival if there is evidence that the rival is already operating efficiently.Your boss gives you the following data on the rival's operations: The average product of labor is 4,the marginal product of the last worker hired is 10,the wage is $20,and the price of output is $5.Based on this information,you should tell your boss to buy the rival.
Average Product
The output produced per unit of input, calculated by dividing total output by the number of units of a specific input.
Marginal Product
The boost in output stemming from an increment in input by one unit.
Wage
The payment received by workers for their labor, typically expressed as an amount per hour or per year.
- Comprehend how market mechanisms and personal preferences affect outcomes in the labor market.
- Acquire knowledge on the basic concepts of marginal productivity theory in the context of distributing income.
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Learning Objectives
- Comprehend how market mechanisms and personal preferences affect outcomes in the labor market.
- Acquire knowledge on the basic concepts of marginal productivity theory in the context of distributing income.
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