TAILIEUCHUNG - Microeconomics for MBAs 8

Microeconomics for MBAs 8. The Economic Way of Thinking for Managers. Microeconomics for MBAs develops the economic way of thinking through problems that MBA students will find relevant to their career goals. Maths is kept simple and the theory is illustrated with real-life scenarios | Chapter 2 Competitive Product Markets 30 not been proven. They must ask their workers to invest sweat equity which is equal to the difference between what the workers could make in their respective labor markets and what they are paid by their firms. The underpayments not only extend the sources of capital to the firm but they also give the workers a strong stake in the future of the firm which can make the workers work all the harder to make the firm s future a prosperous one. The up-front underpayments can make the firm more profitable and increase its odds of survival which can be a benefit to the workers as well as owners. Of course this is one reason many young workers are willing to accept employment in firms that are just starting out. Young workers often have a limited financial base from which to make investments they do however have their time and energy to invest. Underpayments to workers coupled with later overpayments can also be seen as a means by which managers can enhance the incentives workers have to become more productive. If workers are underpaid when they start their rewards can be hiked later by more than otherwise to account for productivity improvements. These hikes can continue - and must continue -- until the workers are effectively overpaid later in their careers or else the workers would not have accepted the underpayments earlier in their careers . However managers must understand that they must be able to commit themselves to the overpayments and that there must be some end to the overpayments. Not too many years ago firms regularly required their workers to retire at age 65. Retirement was ritualistic for managers. Shortly after a manager had his or her sixty-fifth birthday someone would organize a dinner at which the manager would be given a gold watch and a plaque for venerable service and then be shown to the door with one last pleasant goodbye. Why would a firm impose a mandatory retirement age on its workers Such a policy seems .

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• Competitive Product Markets
• Principles of Rational Behavior
• Society and Business
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