MicroEcon Question

Assume you open your own business. Your business is a service business and has zero marginal cost (think of a service that you charge a finder’s fee for whatever it is you find).

A- Use the MRC=MRP concept to determine if you would hire a friend asking to be paid $200,000/year. (4 points).

B- Assume you have determined that your friend is likely to bring $300,000 in fees to your business. Would offering your friend $200,000 be enough to attract him? Assume your friend is motivated solely by income and that your industry is purely competitive (3 points).

C. Would your answer in B change if you had monopsony power in your market? Explain your answer. (3 points)

Essay

 

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