Final answer:
Employers' decisions on how much to pay their workers are influenced by factors such as maximizing profits and minimizing costs. The value of workers' marginal productivity to the firm is a key factor in determining their compensation.
Step-by-step explanation:
The factors that affect employers' decisions on how much to pay their workers include maximizing profits and minimizing costs. Employers aim to maximize profits by ensuring that the wages and benefits they pay to their workers do not exceed the value of their marginal productivity to the firm. This means that employers will pay workers based on the value they bring to the company in terms of their output or contribution to the business.
For example, if a worker's productivity generates $50 per hour for the firm, the employer would not typically pay the worker more than $50 per hour in wages and benefits. Paying more would result in reduced profits for the company. On the other hand, minimizing benefits, such as offering limited or no employee benefits, can also be a strategy to reduce costs and maximize profits.
It is important to note that employers also need to consider market conditions, competition, and supply and demand dynamics when making decisions about worker compensation. These factors can influence the available pool of workers and the levels of wages in the industry or market.