Economics_Ch07 - 07(154-185 EMC Chap 07 5:13 PM Page 154...

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154 C H A P T E R 7 Business Operations C H A P T E R 8 Competition and Markets C H A P T E R 9 Labor, Employment, and Wages
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Productivity is what makes us rich. Specialization is what makes us productive. Charles Wheelan 155
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Why It Matters T o understand the life you are living, it is important to understand the institutions that play a big role in our society. One of those institutions is business. Almost every day of your life you come into contact with some kind of business—when you stop for lunch at a fast-food restau- rant, buy new shoes at the local mall, or purchase your favorite group’s new CD at the electronics store. If you have a part-time job, you are probably working for some kind of local business. This chapter begins to examine business—the institution we all deal with so often. 156 The owner of this fruit and vegetable market in Bombay, India, appears pleased with his efforts to maximize profits, the goal of all business owners.
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The following events occurred one day in November. 8:45 A.M. Jackie started her own business a year ago. Last year she earned $50,032 in profit. This year she hopes to do better. At this moment she is sitting in her office trying to decide whether to hire two more employees. On the one hand, she thinks her business will soon be expanding and she will need two more employees. But on the other hand, she is not sure she can afford to pay the wages of two additional employees. What should Jackie consider when deciding whether to hire additional employees? 11:09 A.M Carl and Vernon are retired. They meet each Wednesday morning at a local restaurant to have breakfast and talk. Carl says, “I’m not sure what is hap- pening to this country. It looks to me like American firms are just shipping jobs overseas.” Vernon nods in agree- ment and then says, “I guess it is a lot cheaper to hire people in other countries than it is to hire people here. You know, when you can hire someone in another country for $2 an hour, why in the world would you pay $14 an hour here?” Carl says, “I guess it’s just good economics to go where your labor cost is low.” “I guess,” says Vernon. Do U.S. companies always hire workers in countries where the wages are low? 12:44 P.M. Bob is eating his lunch at a small restaurant near his workplace. He gets a full hour for lunch each day. He looks at his watch, then he calls the server over to order a small dessert. (Bob is trying to lose weight, but now is not the time.) The server comes over and asks, “So are you going to have some dessert today?” Bob says, “I’ll have a slice of chocolate cake with vanilla ice cream.” “Not in a rush to get back to work?” the server asks. “No,” says Bob, “I don’t have to punch in.” Would Bob be less likely to order dessert if he did have to “punch in” (using a time clock)?
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