Situation #1 Assume That You Have Hired Three Executives to Run

question 21

Essay

Situation #1 Assume that you have hired three executives to run your company each with a different job. All are equally productive and each can do the other person’s job if necessary. Assume that the first executive’s contribution to the company is worth $1,000,000 and is assigned to this task; the second one is worth $800,000 and the third one is worth $500,000.
-Referring to Situation #1 suppose that for the time being you can only afford to hire the first executive. What is the opportunity cost of the first executive's work from the viewpoint of the company? Explain.

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Definitions:

APC

In economics, stands for Average Propensity to Consume, which is the ratio of total consumption to total disposable income.

APC

Average Propensity to Consume, which is the fraction of income that households spend on consumption as opposed to saving.

APS

Stands for Average Propensity to Save, which measures the proportion of income that households save rather than spend on goods and services.

Autonomous Consumption

The level of consumption that occurs when income is zero, representing the consuming behavior independent of current income.