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Question: 1. Explain in words what the equation p*MP=w which appears in the section on Short Run Profit Maximization means. What is its significance?
2. Consider an organization that turns land, labor and capital into outputs. It has a dozen employees, as well as tangible and intangible capital inputs. One of the employees is named Billy Bob. Total annual output with Billy Bob is 100 and without Billy Bob it is 90. Output is sold at a price of $1 million per unit. Billy Bob is not paid a salary of anywhere near $10 million. How can you reconcile this with the equation p*MP=w from page 351?
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