LABOR ECONOMICS (LL+ACCESS)
8th Edition
ISBN: 9781264909339
Author: BORJAS
Publisher: MCG
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Question
Chapter 3, Problem 1RQ
To determine
Explain the strategy of a firm to maximize his or her profit.
Expert Solution & Answer
Explanation of Solution
A profit maximizing firm will hire the employers at the point where the wage of the labor is equal to the value of marginal product. This is because the marginal product is the
This same idea is used by the firm in his output setting. A firm will set its level of output at the point where output price (MR) equal to its marginal cost.
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Tasks
Exercise 1
Assess the following functions:
1. f(x)= x2+6x+2
2.f '(x)=10x-2x2+5
a. Find the stationary points. (5 marks)
b. Determine whether the stationary point is a maximum or minimum. (5 marks)
c. Draw the corresponding curves (5 marks)
Problem 2:
The sales data over the last 10 years for the Acme Hardware Store are as follows:
2003
$230,000
2008
$526,000
2004
276,000
2009
605,000
2005
328,000
2010
690,000
2006
388,000
2011
779,000
2007
453,000
2012
873,000
1. Calculate the compound growth rate for the period of 2003 to 2012.
2. Based on your answer to part a, forecast sales for both 2013 and 2014.
3. Now calculate the compound growth rate for the period of 2007 to 2012.
1. Based on your answer to part e, forecast sales for both 2013 and 2014.
5. What is the major reason for the differences in your answers to parts b and d? If you were to
make your own projections, what would you forecast? (Drawing a graph is very helpful.)
Chapter 3 Solutions
LABOR ECONOMICS (LL+ACCESS)
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