As an employer wants to reduce the production cost during the economic recession, he/she
could choose to (1) lay off some workers without changing wages or (2) keep all workers
but cut wages for all. Which method would you choose? Why?
If I were an employer that wanted to reduce the production cost during the economic
recession, I would choose to lay off some workers without changing the wages of my remaining
employees. After this decision has been made, my business would be granted with the
opportunity to breathe during this difficult economic time period. Prior to making the decision, I
would look to alternative, extensive solutions that would allow a reduction in the production cost
during the recession.
If I chose to keep all of my workers and cut each of their wages, it would be unfair to my
employees and more than likely end up loosing them in return. By keeping all of my employees,
their suffering would still continue to take place at their homes as they would not be bringing in
enough money, forcing them to be behind in the upkeep of their standard ways of living.
According to Suddeath, Martin, Jackson, and George (2018), during the recession of
2008 “the national unemployment rate doubled from 5% to 10% from January 2008 to October
2009.” At this point, unemployment could become a possibility that they could seek to benefit
from while searching for new job opportunities, but the wages are not the problem at hand here,
but instead, the economy is.
Under what condition should a firm continue to produce in the short-run if it incurs losses
at the best level of output?
A firm should continue to produce in the short run if it incurs losses at the best level of
input under the condition that production will continue even if the firm incurs losses as long as
the product’s price exceeds the AVC’s price. Under these conditions, the excess of P over AVC
will cover a portion of the FC in order for the total losses of the firm to be smaller than its total
fixed costs. Once the recession ends, any employees that were laid off might have the possibility
of re-employment with the company.
References
Suddeath, E., Martin, L., Jackson, D. F., & George, P. (2018). Adolescent civic involvement and
the great recession of 1008: Testing certainty of employment. Journal of Community
Engagement and Scholarship, 11(1). 20-26. Retrieved from https://search-proquest-
com.ezproxy.liberty.edu/docview/2166930375?pq-origsite=summon
