Next: Extension of Efficiency Wage
Up: The Rebitzer and Taylor
Previous: Short Run Analysis
Long Run Analysis
- Profits now:
Where R = cost of entrepreneurial abilities. Thus is normal profit.
- After optimizing and taking into account the long run 0 profit criteria,
Average and Marginal Product versus Average and Marginal Cost
- If is small: per firm employment has risen, industry employment is lower.
- If is large: industry employment rises above the previous equilibrium level in the long run.
, and industry employment falls back to its original level though per firm employment has actually risen.
Matthew W. Chesnes