Chapter 5: The Demand for Labor

Consider the short-run production function TP = (K×L)^1/2 where K is fixed at 100. If the current level of labor is L = 4, what is the value of the firm's total product?

20

A lower wage induces all firms to hire more labor and produce more output, causing the supply of the product to increase. The resulting decline in product price shifts the firms' _____.

A lower wage induces all firms to hire more labor and produce more output, causing the supply of the product to increase. The resulting decline in product price shifts the firms' labor demand curves to the left. The labor demand curve reflects the relationship between the wage rate and the quantity of labor that firms are willing and able to hire. When the wage rate decreases, the cost of labor decreases, which increases the profit margins of firms and causes them to increase the quantity of labor they demand. This results in a leftward shift of the labor demand curve. The correct answer is: D. labor demand curves to the left.

Consider the short-run production function TP = 2× (K × L)^1/2 where K is fixed at 125. If the current level of labor is L = 5, what is the approximate value of the marginal product of labor? (Round your answer to the nearest whole number.)

C. 5

For a firm that sells in perfect competition, which of the following are equivalent to the firm's demand for labor? (Select all that apply.)

For a firm that sells in perfect competition, the following are equivalent to the firm's demand for labor: the VMP of labor (the value of the marginal product of labor, which equals the wage rate that the firm must pay to hire additional units of labor) the MRP of labor (the marginal revenue product of labor, which equals the additional revenue generated by an additional unit of labor) The correct answers are: the VMP of labor the MRP of labor

If the marginal product of labor is greater than the average product of labor, then _____.

If the marginal product of labor (MPL) is greater than the average product of labor (APL), then the average product of labor must be rising. When MPL is greater than APL, it means that the addition of one more worker results in a higher increase in output (MPL) than the average output per worker (APL). As a result, the total product of labor increases and the average product of labor increases. Therefore, the correct answer is D. the average product of labor must be rising.

For a firm that sells its output in perfect competition, labor's MRP equals its VMP because _____.

P equals MR

The total product of the firm is equal to TP = 2 * (K * L)^1/2, where K is fixed at 125 and L is equal to 5. Plugging in the values:

TP = 2 * (125 * 5)^1/2 TP = 2 * (625)^1/2 TP = 2 * 25 TP = 50 So, the value of the firm's total product is 50.

Consider the short-run production function TP = 2×(K×L)^1/2 where K is fixed at 125. If the current level of labor is L = 5, what is the value of the average product of labor?

The average product of labor is calculated by dividing the total product by the number of workers. To calculate the total product, we can plug in the values for K and L into the short-run production function TP = 2 * (K * L)^(1/2): TP = 2 * (125 * 5)^(1/2) = 2 * (625)^(1/2) = 2 * 25 = 50 The average product of labor is then calculated by dividing the total product by the number of workers: APL = TP / L = 50 / 5 = 10 Therefore, the value of the average product of labor with fixed capital of K=125 and labor of L=5 is 10.

Identify a correct statement about the market demand for labor.

The market demand for labor is the horizontal summation of the labor demand curves of all individual employers, and it reflects the total amount of labor that employers are willing and able to hire at each wage rate. The market demand for labor can be elastic, inelastic, or unit elastic, depending on the responsiveness of the total amount of labor demanded to changes in the wage rate. The correct answer is: C. It is less elastic than the simple horizontal summation of the labor demand curves of individual employers.

Which of the following is a reason for the marginal product of labor to eventually fall as the quantity of labor increases?

The reason for the marginal product of labor to eventually fall as the quantity of labor increases is because of diminishing marginal returns. This occurs when there are not enough factors of production, such as capital, to support the increasing number of workers, causing the marginal product of labor to decline. The correct answer is: C. Declining amount of capital per worker.

The short run is the period of time over which _____.

The short run is the period of time over which at least one resource is fixed. In the short run, some inputs such as capital and some forms of labor, like specialized machinery and equipment, are fixed and cannot be easily adjusted. Firms must work with the limited resources they have and are unable to change the quantities of these inputs. In contrast, other inputs like regular labor and raw materials can be adjusted to respond to changes in demand. Therefore, the correct answer is

Because the marginal product of labor is calculated given a fixed amount of capital, it must eventually _____.

begin to fall

The demand for labor or another resource is a derived demand, which means that it is one that _____.

is derived from the demand for the product it produces

All else equal, the labor demand curve for a perfectly competitive firm will be _____.

more elastic than the labor demand curve for an imperfectly competitive firm

Because both the output effect and the substitution effect apply during the long run, the long-run demand for labor tends to be _____.

more elastic than the short-run demand for labor

If all firms in a market respond to an increase in the wage rate by employing less labor, the product price will _____.

rise, increasing the marginal revenue product of labor

Because the product price falls as a monopolist hires more labor, the monopolist has a labor demand curve that is _____ the labor demand curve of a perfectly competitive firm.

steeper than

If the average product of labor is falling, then _____.

the marginal product of labor must be less than the average product of labor

One of the main determinants of the strength of the demand for textile workers is the price of textiles products; the other is _____ of textile workers.

the productivity