Real Profit per Worker in the Price-Setting Model
In the price-setting model, real profit per worker is the portion of a worker's output that is retained by the firm as profit, measured in units of output. It is calculated as the difference between the output per worker (位) and the real wage (w) paid to the worker.
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Firm's Profit Share per Worker in the Price-Setting Model
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Figure 1.22: Determinants of the Price-Setting Real Wage
Real Profit per Worker in the Price-Setting Model
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Learn After
Calculating Firm Profit in a Simplified Economy
In an economy where the output per worker remains constant, a firm successfully increases its market power, allowing it to claim a larger share of its revenue as profit. What is the direct consequence for the real profit per worker?
True or False: In an economy, if firms' average profit share of revenue increases, the economy-wide real profit per worker must also increase.
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