This website uses cookies to ensure you have the best experience. Learn more

Economics Essay

670 words - 3 pages

Economics Exam 2 Essay
1. With capital, we mean investments in technology. Capital investment such as machinery and equipment to enhance the productivity of labor can increase the marginal product of labor. In other words, capital investment can enhance productivity of labor given other factors of production remain the same. More college education, if standalone - meaning without additional investment in technology, might not produce the same results.
Thus, capital investment might be a better investment in the short run. However, as the marginal utility of capital investment diminishes, sending labor to college to get further college education might complement the diminishing marginal returns on capital to further enhance productivity. Capital investment and college education or further training at the same time is the best investment option.
In a more objective decision making, the better investment should be identified ...view middle of the document...

Without the training MP is low, and this is precisely why the training is given. It is expected that the training will increase MP and this will contribute to growth of the firm. Accordingly the MRP is slow before training and higher after training is complete, as MR remains unchanged and of firm’s control (as it is based on demand conditions for the final good).

As per optimal rule in real life this may not happen and firms end up paying a constant salary irrespective of training. In this sense the rule is violated temporarily. But in the long run, after training the MP rises substantially. As a result, the MRP can even exceed MC -violating the rule, even after training. Higher salaries (that exceed MRP) to new workers do not violate any rule, when we consider the total horizon. Overtime the firm recovers its costs and higher MC from the employee in some way-by retaining him or asking for the costs upfront. If the worker is retained after training the MRP rises enough to exceed MC. This balances out the opposite inequality before training. Overall if we account for the long run we can use the present value of future MRP and future MC. It will be seen that the discounted MRP equals the discounted MC. This is the rule that firms follow.

This logic lies at the heart of many agreements that a worker is asked to enter into before training. These take the form of bonds that retain a worker long enough for a firm to recoup its training costs. Employees are often required to sign a bond where they promise to stay in the firm for a fixed period before they are sent for training. They are not to leave the firm before this period is over. Typically this period is based on recovery of the cost of training provided. These agreements ensure that the firm recovers its costs of raining and training is not in optimal. In other cases workers are made to partly pay for the training so that they have some stake in the training costs. Therefore, in the short run it may seem irrational to train and incur MC>MRP. But over long run, optimality is ensured as MRP often exceeds MC. Overall the sum of MC and MRP over time will be equal. Optimality is not violated in long run.

Other Papers Like Economics

Economics Essay

1143 words - 5 pages According to the book of "Economics in One Lesson" by Henry Hazlitt, this book is an analysis of economic fallacies which are quite prevalent. The first part of this book argues that the art of economics consists in looking the short and long term effects of any policy for the whole groups (Hazlitt, 2008). Some public policies published by government address the problem and benefit the community in the long run, while other policies only benefit

Economics Essay

1946 words - 8 pages Milestone 1: Business Recommendations Based on Economic Projections Business Recommendations Based on Economic Projections Economics Business Recommendations Based on Economic Projections Market Structure Business recommendations for Big Drive Auto will focus on pricing strategies, possible economic change over the next five years, business decisions related to trade and specialization and how they will affect future

Economics

1014 words - 5 pages Definitions of Economics - Economics is the study of how people, firms and societies choose to allocate their scare resources to satisfy some of their unlimited wants. Definitions of Unemployment - Unemployment in a country is measured by the unemployment rate. It rises during a period of recession and falls during a period of expansion. Definition of inflation - Inflation is defined as the persistent and sustained

Economics - 823 words

823 words - 4 pages ECONOMICS Kofi A. Annan of Ghana, the seventh Secretary-General of the United Nations, is the first to be elected from the ranks of UN staff. His first five-year term began on 1 January 1997 and, following his subsequent re-appointment by the UN Member States, he will begin a second five-year term on 1 January 2002. As Secretary-General, Mr. Annan has given priority to revitalizing the UN through a comprehensive programme of reform

Economics - 2799 words

2799 words - 12 pages ECONOMICS FOR DEMOCRATIC AND OPEN SOCIETIES PROJECT POLICY PAPER #2 The Economics of Outsourcing: How Should Policy Respond? Abstract Outsourcing is a central element of economic globalization, representing a new form of competition. Responding to outsourcing calls for policies that enhance national competitiveness and establish rules ensuring acceptable forms of competition. Viewing outsourcing through the lens of competition connects with

Economics - 1383 words

1383 words - 6 pages Ownership in Transition Economies. Journal of Economic Literature, 47(3) 699-728. Use the UCL Economic Journals page and choose the Atypon link. Bhaumik, S and Estrin, S. (2007). ‘How transition paths differ: enterprise performance in Russia and China’ Journal of Development Economics 82 (2007) 374–392 Link Carlin, W., Schaffer, M. and Seabright, P. (2012) “Soviet power plus electrification: what is the long-run legacy of communism?”, Explorations in

Economics - 1108 words

1108 words - 5 pages Running Header: Consumption Patterns and Definitions Economics Economics is the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society. In reference to economics coordination refers to how three central problems facing any economy are solved. They are: 1. What, and how much, to produce. 2. How to produce it

Economics - 2882 words

2882 words - 12 pages Unemployment: An evil necessity? 1. Introduction By definition economics is “a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services.” And as with other types of sciences, economics contains many beliefs and theories that may be difficult to understand, yet are essential in the “day to day” decision making for many people. But also like other sciences, economics

Economics - 2855 words

2855 words - 12 pages Question 1: Elasticity is a very important conception in economics. It is ‘a measure of how much one economic variable—such as the quantity demanded of a product—responds to changes in another economic variable—such as the product’s price’(Hubbard, Garnett, Lewis, and O’brien 2010). There are four different but relevant elasticities—price elasticity of demand, cross-price elasticity of demand, income elasticity of demand and the price

Economics - 565 words

565 words - 3 pages UNIVERSITY OF DUBAI MBA 600 - MANAGERIAL ECONOMICS TAUGHT BY PROFESSOR AZZEDDINE AZZAM FALL 2011 GRADED ASSIGNMENT 2 40 POINTS (PLEASE HAND IN BY 6:30 PM ON WEDNESDAY 14 DECEMBER, 2011) Course Learning Objectives: 2. Understand competitive markets and economic efficiency. 3. Use firm and industry cost curves for production and strategic decisions

Economics - 1096 words

1096 words - 5 pages others. He says that it is bad economics to impose preferences on individuals whose lives are much different from all the rest.  The entire chapter rests on the central idea that thinking in terms of incentives and disincentives is the best way to formulate policy. He goes further by saying that one the most important roles of government is regulating these incentives to make sure that they serve its purpose.   Chapter 2     The chapter begins

Related Essays

Economics Essay 612 Words

612 words - 3 pages Implications of Economics and Policy for Health Professionals Katrina Hill Health Policy and Economics Dr. Shana Lavarreda September 7, 2014 Discipline of Health Economics Many years ago healthcare and its delivery system were limited in care for patients or treatment options for physicians. The procedure of care includes diagnosis, treatment, prevention, rehabilitation, and palliative care (Buchbinder, 2012

Economics Essay 719 Words

719 words - 3 pages Tutorial 1 Questions (based on Textbook End-of-Chapter Questions) Question 1 Refer to Q1.1 Chapter 2 (Page 118) What do economists mean by opportunity cost? According to this definition, is there anything that does not have an opportuntiy cost? Question 2 Refer to Q1.2 Chapter 1 (Page 78). What is scarcity? Why is scarcity central to the study of economics? Question 3 Refer to Q1.10 Chapter 1

Economics Essay 1308 Words

1308 words - 6 pages Option 1 a A basic assumption in traditional economics is that utility increases with the consumption of more goods and services, the concept mostly commonly known as “more is better” this concept explains that all else equal, a person prefers more consumption to less. However their consumption may not always be what they prefer, they may be restricted in their preferences due to resource constraints such as time and money, money being the most

Economics Essay 5568 Words

5568 words - 23 pages omECO 204, 2010-2011, Test 3 Solutions  This test is copyright material and may not be used for commercial purposes without prior permission    University of Toronto, Department of Economics, ECO 204 2010 ‐ 2011 Ajaz Hussain  TEST 3 SOLUTIONS 1   These solutions are purposely detailed for your convenience  YOU CANNOT LEAVE THE ROOM IN THE LAST 10 MINUTES OF THE TEST  REMAIN SEATED UNTIL ALL TESTS ARE COLLECTED  IF YOU DETACH PAGES IT’S