21 Jul WHAT IS THE RATIONALE BEHIND FORDS HIGH-WAGE POLICY TO THE MARGINAL PRODUCTIVITY THEORY OF EMPLOYMENT?
Where Q = Quantity o Show more A firm has the following short-run production function: Q = 50L + 6L^2 0.5L^3 Where Q = Quantity of output per week L = Labor (number of workers) ^ exponential power. L^2 implies L square Since all the necessary computations for the problem are available all you need to do is to include only the relevant and necessary portion of the computations provided in Moodle. However you need to explain very clearly in your own word all the implications behind the numbers. 1. What would firms do in the long run as far as production and hiring are concerned and why if economics situation does not improve and price reduction does not help their bottom line? Consider what business usually does if economic woe persists. 2. Henry Ford the founder of Ford Motor Company offered in 1914 $5 workday wage which was about twice the going wage. What is the rationale behind Fords high-wage policy to the marginal productivity theory of employment? What is the major difference in their respective goals? Be specific as to what each approach tries to achieve. Ford called the $5-a-day wage one of the finest cost-cutting moves. In any hiring decision there are typically three different problems; adverse selection due to asymmetry of information prior to hiring and of moral hazard after hiring in your answer. Please integrate these three terms asymmetry of information adverse selection and moral hazard into your answer and explain clearly how Fords high wage policy specifically solved these three problems associated with hiring? Show less
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