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Question
Figure 17-6
Figure 17-6 shows two different compensation schemes for the Safelite Glass Corporation, an installer of auto glass windshields. Under Scheme I, the firm pays a consistent wage of $80 per day based on an 8-hour workday. Qmin represents the cut-off point under the hourly-wage system: if a worker installed fewer than Qmin windshields, the worker got fired. Scheme II represents a piece-rate scheme with an earnings floor: no worker would get less than $80 per day (for an 8-hour workday) and would have to produce at least Qmin. For any output level beyond Q* the worker earned an additional $20 for each unit produced.
Refer to Figure 17-6. Suppose Qmin = 2 windshields and Q*=5 windshields. Under Scheme II, a worker has to install Q* windshields before she earns an additional $20 per windshield installed. What is a potential problem with this scheme?
A) Workers might be more concerned with increasing output beyond Q* and less concerned with the quality of their work.
B) Any increase in output between Qmin and Q* benefits the employer only.
C) It violates labor laws because workers are not compensated for output between Qmin and Q*.
D) Workers have no incentive to produce output to between Qmin and Q*.
Answer
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Related questions
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If a firm in a perfectly competitive industry introduces a lower-cost way of producing an existing product, the firm will be able to earn economic profits in the long run.
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Which of the following describes a difference between allocative efficiency and productive efficiency in a perfectly competitive market?
A) Allocative efficiency is achieved only in the long run. Productive efficiency is achieved only in the short run.
B) Allocative efficiency is achieved only in the long run. Productive efficiency is achieved in the short run and the long run.
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If a perfectly competitive firm raises the price it charges to consumers, which of the following is the most likely outcome?
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B) The market demand curve shifts to the left, causing price to fall and market output to decrease.
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Refer to Figure 12-17. Which of the following statements is true?
A) The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit. New firms will enter the market and shift the market supply curve to the left.
B) The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit, but it would earn a greater profit if it produced at the lowest point on the ATC curve.
C) The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit. New firms will enter the industry; as a result, the firm will be forced to exit the industry in the long run.
D) The firm will produce 30 thousands pounds of apples in the short run and earn an economic profit. In the long run the firm will break even.
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A firm's expansion path
A) is the same thing as its long-run average cost curve.
B) is a curve that shows a firm's cost-minimizing combination of inputs for every level of output, holding input prices constant.
C) shows the targeted growth rate in sales over the long run.
D) is a curve that shows expected profits at various price levels.
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Suppose two countries use different combinations of inputs, such as labor and capital, to produce the same product. This implies all of the following except that
A) the two countries use different technologies to produce the product.
B) the inputs are not equally productive in the two countries.
C) the prices of the inputs are not the same in the countries.
D) one country is more efficient in the production of the good than the other.
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In the long run which of the following is true?
A) Total cost = fixed cost + variable cost.
B) The size of a firm's physical plant can be changed but the firm cannot adopt new technology.
C) There are no fixed costs.
D) The firm can vary its explicit costs but not its implicit costs.
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As a firm moves to higher isocost lines
A) its profits increase.
B) its revenue increases.
C) its input price ratio increases.
D) its total cost increases.
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The marginal rate of technical substitution is measured by
A) the slope of the isoquant.
B) the relative input prices.
C) the slope of the isocost line.
D) the ratio of the product's price to the product's cost of production.
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The typical shape of an isoquant is
A) convex towards the origin.
B) concave towards the origin.
C) linear and downward sloping.
D) linear and upward sloping.
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An expansion path shows
A) the level of sales necessary for a firm if it wants to expand.
B) the level of long-run average cost at different scales of operation.
C) the least-cost combination of inputs for each level of output.
D) the returns to scale at each level of output.
Q:
Maximizing the level of output for a given total cost of production
A) is equivalent to producing the profit maximizing output level.
B) is equivalent to minimizing cost for a given level of output.
C) necessitates using only relatively low-priced inputs.
D) will maximize total revenue.
Q:
Golda Rush quit her job as a manager for Home Depot to start her own hair dressing salon, Goldilocks. She gave up a salary of $40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest) and borrowed $10,000 from a close friend, agreeing to pay 5 percent interest per year. In her first year, Golda spent $18,000 to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 on equipment and hairdressing material. Based on this information, what is the amount of her implicit costs?
A) $80,000
B) $70,000
C) $42,000
D) $41,500
Q:
Which of the following would be categorized as an opportunity cost?
a. not being able to spend your $10,000 savings if you sink the money in your business
b. the cost of purchasing supplies for your house-cleaning business
c. the cost of purchasing auto insurance for your dry-cleaning delivery business
A) a only
B) a and c only
C) b and c only
D) all of the above