Exam #1 Essays - Romana S Hai ECON 002 Essay Exam 1 Essays...

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Romana S. Hai ECON 002 Essay Exam 1 (February 16, 2007) Essays Submitted: 1. Self-Interested Economic Behavior 3. Price Controls - The Minimum Wage Law Controversy
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1. Self-interested economic behavior Bedrock Gadgets, reacting to ever more intense competition, and shrinking profits, cuts wages of production workers from $10 per hour to $8 per hour. 1a. Explain why Bedrock Gadgets believes that lower wages may lead to higher profits. Bedrock Gadgets believes that lower wages may lead to higher profits because, with lower wages, the extra dollars that would have gone to pay employees can now be looked upon as profit. Bedrock Gadgets can now save two dollars every hours an employee works, which allows them to consider that a profit. 1b. Explain why imposition of lower wages may lead to conflict with its own work force and why this conflict may frustrate the firm’s desire for higher profits. Lowering wages may cause tension in the work force; this can potentially lead to employees quitting their jobs at Bedrock Gadgets. If employees quit, this decreases the amount of staff available to Bedrock Gadgets. Not enough staff leads to cuts in
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