Suppose a firm the firm's initial costs when hiring a worker include hiring and training costs of $50. The wage rate for each period of employment is Wt=$100 (the same for all periods), and the value marginal product of a worker is also the same in every period, VMPt=VMP (a constant). Assume the interest rate is zero (the firm has no discounting factor over time).
A. Write out this firm's profit maximizing employment rule for two periods. How productive must a worker be each period in order for the firm to hire a worker expected to work 2 periods: VMP = . If VMP=110 is it worth it to hire a worker for 3 periods? (yes/no)
B. Now suppose that the union negotiates a signing bonus of $100 which the firm must pay initially (in addition to the hiring and training costs) when it hires a worker. Write out the new profit maximizing employment rule for two periods. How productive must a worker be each period in order for the firm to hire a worker expected to work 2 periods: VMP = . In order for the firm to hire a worker for 3 periods, a worker's productivity in each period must be VMP = .
C. Explain how this might relate to the observation that unionized workers have lower turnover rates.
Suppose a firm the firm's initial costs when hiring a worker include hiring and training costs...
To maximize profit, a firm will hire workers when the in revenue from hiring an additional worker the worker's wage. O increase; is greater than O decrease; is less than or equal to O increase; is less than or equal to O decrease, is greater than To maximize profit, a firm will hire workers when the in revenue from hiring an additional worker the worker's wage. O increase; is greater than O decrease; is less than or equal to O...
1. Suppose a firm’s cost of hiring another worker is $100. The firm pays an hourly wage of $15 to all workers. Each additional worker adds 100 units to total production, holding constant capital and average hours per worker. If a current worker works an additional hour, holding constant capital and the number of employees, total production increases by 8. The firm faces diminishing marginal returns to workers and to hours per worker. A. Is the firm maximizing profits? Why...
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4. cosider a firm that produces a certain good. The demand is uncertain. There is 50% chance the demand is high, and 50% chance the demand is low. When the demand is high, its demand for labor is w- 12 -0.5L. When the demand is low, its demand for labor is w 8 - 0.5L. Here uw is wage for each worker and L is the total number of workers it hires. When the demand is high, the profit of...
4. cosider a firm that produces a certain good. The demand is uncertain. There is 50% chance the demand is high, and 50% chance the demand is low. When the demand is high, its demand for labor is w- 12 -0.5L. When the demand is low, its demand for labor is w 8 - 0.5L. Here uw is wage for each worker and L is the total number of workers it hires. When the demand is high, the profit of...
4. Cosider a firm that produces a certain good. The demand is uncertain. There is 50% chance the demand is high, and 50% chance the demand is low. When the demand is high, its demand for labor is w 12-0.5L. When the demand is low, its demand for labor is w 8-0.5L. Here w is wage for each worker and L is the total number of workers it hires. When the demand is high, the profit of the firm can...
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