Afirm’s production function is represented by q(m, r) = 4m 3/4r1/3, where q denotes output, m raw materials, and r robots. the firm is currently using 6 units of raw materials and 12 robots. according to the mrts, in order to maintain its output level the firm would need to give up 2 robots if it adds 9 units of raw materials. (a) true (b) false
The Correct order is:
1. Firm comes into existence.
2. People in the firm start to shirk.
3. Increased shirking reduces the output of the firm.
4. A monitor is chosen.
5. A monitor is made a residual claimant.
If there will be a firm then there will be people who will work in the firm. So the firm's existence is the first event.
When there will be people working in the firm, there are chances that they will begin to shirk. Shirking is when a person produces less output than he promised to.
The more there will be shirking, the lesser work will done by the people which will reduce the output of the firm.
In order to reduce shirking a monitor is chosen who motivates the shirking people to produce more output.
A monitor is made a residual claimant so that he/she doesn't shirk. The monitor is given a share in the profits of a firm to prevent him/her from shirking.