Question

a law firm hires eileen, a recent graduate from law school, and pays her an annual wage of $40,000. it also hires becky, a second-year law student, and pays her an annual wage of $30,000. eileen and becky were born in the same country, attended the same university, and studied in the same graduate program.

Answer 1

To determine the profitability of Eryn's legal practice, we need to calculate the implicit costs, which include the office rent and the law clerk's salary. If the total revenue exceeds the total implicit costs, the practice would be profitable.

Step-by-step explanation:

The topic being discussed is the profitability of Eryn's legal practice. In order to determine if her practice would be profitable, we need to calculate the implicit costs involved. Implicit costs refer to the opportunity costs of using resources in a particular way.

In Eryn's case, the implicit costs include the rental cost of the office and the salary of a law clerk. The office rent is $50,000 per year, and the law clerk's salary is $35,000 per year. Therefore, Eryn's total implicit costs would be $85,000.

To determine if her legal practice would be profitable, we need to compare the total revenue she expects to earn ($200,000 per year) with the total implicit costs ($85,000 per year). If her revenue exceeds her implicit costs, then her practice would be profitable. If her revenue is less than her implicit costs, then her practice would not be profitable.

Answer 2

Wages could differ for the given scenario probably because of their human capital.

What informs their human capital?

Even though Eileen and Becky were born in the same country, attended the same university, and studied in the same graduate program, there might be differences in their human capital that settles the wage disparity.

Human capital includes factors like skills, knowledge, work experience, and any additional qualifications. Eileen, being a recent law school graduate, may possess specific skills, achievements, or experiences that set her apart from Becky, justifying a higher starting salary. This difference in human capital is likely the primary reason for the wage gap in this scenario.

Complete question:

Why wages differ for the scenario in the following table, indicate the most likely reason for the difference in earnings. Differences Differences in Human Capital Compensating in Natural Differential Labor Scenario Ability Unions A law firm hires Eileen, a recent graduate from law school, and pays her an annual wage of $40,000. It also hires Becky, a second-year law student, and pays her an annual wage of $30,000. Eileen and Becky were born in the same country, attended the same university, and studied in the same graduate program.