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If demand is represented by Qd = 50 - 0.5P + 0.005I where I = $50,000 and supply is represented by Qs = 100 + 0.4P - 2W where wages (W) = $15.00, compute the equilibrium price and quanity. What happens if income falls to I = $40,000?
Business Economics, Economics
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Would it ever be rational for a firm to retain an employee whose current marginal revenue product is less than her current wage? Explain.
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