The Impact of Business School Managers on Wages, Innovation, and Profits

The Impact of Business School Managers on Wages, Innovation, and Profits

But as you now know, a reduction in cost would shift the supply curve to the right, prompting a reduction in the firm’s selling price. Let’s assume for the sake of argument that Acemoglu is right. In other words, assume that when the supply curve shifts to the right due to a reduction in labor costs, the firm’s selling price remains unchanged, so profit increases. In order for this scenario to be true, what would have to be true about the firm’s demand curve? You may draw a graph to illustrate your answer, but you MUST also include enough verbal description to show that the way you have drawn your demand curve supports Acemoglu’s claim about the effect of lower wage costs, which is that the firm’s selling price remains unchanged and its profit increases. Daron Acemoglu chides Stephen Dubner about using the term “efficiency” two different ways within one question. How would you make the distinction between allocative efficiency and productive efficiency in correcting Stephen Dubner? Does the Freidman doctrine imply that firms will be efficient both allocatively and productively? How do Daron Acemoglu’s findings suggest that Business School managers are creating some type of deadweight loss? When Stephen Dubner confronts Daron Acemoglu about the high selling price of his textbook on Amazon, Acemoglu replies by saying he feels “bad about that.” But then Acemoglu goes on to say that students have more options now in terms of buying e-books or renting printed texts, with a tone of voice implying those options are “good news”. Let’s take a hypothetical example here. Suppose a textbook publisher knows that there are two types of customers in its market: Scholars, who want to cover the material in depth; and Skimmers, who want a superficial read of the main points. The publisher offers two versions of the book: a hardbound printed version and an online e-book. Scholars are willing to pay $165 for the hardbound printed version or $115 for the online e-book. Skimmers are willing to pay $125 for the hardbound...