MICROECON: CHAPTER 12 "LABOR MARKET"
at low wages the labor supply curve for most people slopes upward because
as wages increase, the opportunity cost of leisure increases
if national laws protecting the health and safety of workers completely eliminate any and all risk, then
compensating wage differentials disappear and workers in risky occupations may be no better off
a firm will employ an additional unit of labor as long as the employment of labor adds more to the firm's revenue than it does to the firm's
cost
the demand for a factor of production depends on the
demand for the products it helps to produce
marginal revenue product of labor for a competitive seller is
equal to the marginal product of labor multiplied by output price
workers in dynamite receive higher wages than if they worked in other jobs that require some level of skills
example of compensating wage differentials
compensating differentials are
higher wages that compensate workers for unpleasant aspects of a job
firms use information on labor's marginal revenue on labor's marginal revenue product to determine
how many workers to hire at each wage rate
a worker's accumulated investment in education, training, experience and health is called
human capital
the combined effect (both income and substitution) of a wage increase is that
if the substitution effect outweighs the income effect, the labor supply curve slopes upward, but if the income effect outweighs the substitution effect, the labor supply curve is backward-bending
on-the-job training received by an apprentice electrician
is a good example of an investment in human capital
the most accurate definition of a worker's "marginal revenue product"
is the change in firm's total revenue as the result of hiring an additional worker
the demand for labor is described as a derived demand because
its derived from the demand for products that use labor in the production process
the substitution effect of a wage increase is observed when
leisure's higher opportunity cost causes workers to take less leisure and work more
one reason the supply of carpenters is greater than the supply of physicians is because
of differences in human capital
painters who pant water towers earn higher wages relative to painters who paint houses because
painting water towers is more risky
if the price of labor falls, we can expect
quantity demanded of labor will increase
an increase in demand for a product will shift the demand for labor used to produce the product
rightward
an individual's labor supply curve shows
shows the relationship between wages and the quantity of labor that she's willing to supply
demand in factor markets differ from demand in product markets in that
the demand for a factor of production is influenced by workers' productivity and by producers expected sales revenues, not by tastes or preferences of consumers
the income effect of a wage increase is observed when
the higher wage income causes workers to take more leisure time and work less
the difference between labor's marginal product and marginal revenue is
the marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue
the marginal revenue product of a resource is
the marginal product of the resource multiplied by the price of the product it helps to produce
firms should hire additional units of a resource as long as
the marginal revenue product of the resource exceeds the cost of an additional unit of the resource
if Molly Bee increases her work hours, when her wage increases
the substitution effect of the wage increase outweighs the income effect
true or false that:
the typical labor supply curve is upward sloping
if "Alan Shaw" reduces his work hours when his salary increases
then the income effect of his salary increase dominates the substitution effect
a union may attempt to obtain stricter certification requirements or longer apprenticeships, which would raise worker's wages because
they shift the labor supply curve leftward
