If a Firm Finds Itself at the Point Where the Value

question 128

Multiple Choice

If a firm finds itself at the point where the value of marginal product of labor is greater than its wage rate,then the firm

• A) stops hiring more workers but does not fire any because the firm is maximizing its profit.
• B) decreases the number of workers it has hired in order to increase its profit.
• C) increases the number of workers it hires in order to increase its profit.
• D) increases sales to keep its employees busy.
• E) changes its employment of workers and maximizes its profit by hiring the number of workers that makes the difference between the value of the marginal product and the wage rate as large as possible.

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Definitions:

Baumeister

Refers to Roy F. Baumeister, a psychologist known for his work on the self, social rejection, belongingness, and other aspects of social psychology.

Normative Influence

Social influence whereby individuals change their behavior or attitudes to conform to norms or expectations of a group to gain acceptance or approval.

Prior Commitment

An individual’s agreement in advance to be responsible if trouble occurs: for example, committing oneself to protect the property of another person against theft.

Social Role Theory

A theory that suggests much of social behavior can be understood by the roles individuals assume, which are influenced by societal norms and expectations.