There are multiple derivations of the Rational Rule. Define the Rational Rule broadly. Define the Rational...

There are multiple derivations of the Rational Rule. Define the Rational Rule broadly.
1. Define the Rational Rule for Buyers
2. Define the Rational Rule for Sellers
3. Define the Rational Rule for Workers
4. Define the Rational Rule for Society
5. Define the Rational Rule for Employers

Expert Solution

1) Rational Rule for Buyers: A rational consumer is considered to be an individual that makes rational decisions on his consumption and decides for the option that maximizes the utility. A rational buyer will buy more of an item when the marginal benefit exceeds (or equal to) the price

2) Rational Rule for Sellers: According to the rational rule the seller will be selling more of a good when the marginal cost has not risen to exceed (or equal to) the marginal benefit. Thus will keep selling until marginal revenue equal to marginal cost

3) Rational Rule for Workers: A rational consumer will decide to work additional hours as long as the wage would be at least as large as the marginal benefit of another hour of leisure

4) Rational Rule for Society: The theory states that social efficiency will be achieved when the marginal social benefits to society (MSB) will be equal to the marginal cost/opportunity to society (MSC)

5) Rational Rule for Employers: The employee will be hired up to the point when the marginal revenue product exceeds or equal to the wage rate. The employer will hire more workers if the MRP exceeds than or equal to the price.

Rahul Sunny answered 7 months ago

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