Is law of diminishing returns result of firms hiring workers


1. Can you think of an example of how you or someone you know has experienced economic rent as a measure of labor market power?

2. Historically there has been a divergence between productivity and wage growth. During the 1973 to 2011 period, labor productivity rose 80.4 percent but real median hourly wage increased 4.0 percent, and the real median hourly compensation (including all wages and benefits) increased just 10.7 percent.

So actually, the typical worker has lost bargaining power in the economy over the last three decades. Why do you think this is so? Does it defy the economic law that the wage rate should be equal to the MRP?

Is it possible to reconnect growth in overall productivity and wage compensation?

3. Do increasing marginal costs result from the rising wages of workers?

4. Is the law of diminishing returns a result of firms hiring the best workers first?

5. A competitive firm breaks-even when economic profits are zero-that is, when the demand curve (the market price) just equals the minimum point on the average-total-cost curve.

So why would a firm operate long term when economic profits are zero?

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Microeconomics: Is law of diminishing returns result of firms hiring workers
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