Ch 10 Input Demand - The Labor Market

What I the equation used to find out Total Revenue (TR)?

TR = Quantity of Output x Product Price

What is the equation used to find the amount of a product?

# of a product = # of a product produced by 1 less worker + Marginal Product of Labor (MPL)

If a firm uses only one variable factor of​ production, what can be said of the marginal revenue product​ curve? A. It is the​ firm's demand curve for that factor in the short run. B. It shows us the shutdown point of the firm. C. It illustrates the​ firm's willingness and ability to supply goods and services at all prices. D. It predicts the market price for that factor of production.

A. It is the​ firm's demand curve for that factor in the short run.

For a perfectly competitive​ firm, the marginal cost curve determines how much output a​ profit-maximizing firm will produce. For input​ markets, the marginal revenue product curve determines how much labor a​ profit-maximizing firm will hire in a perfectly competitive labor market. Explain how the reasoning behind these two concepts is related. A. Profit will increase for each unit of output where price is greater than marginal cost B. Profit increases for each unit of output where marginal cost is greater than price. C. Profit increases so long as the additional gain in cost exceeds the additional gain in revenue. D. Profit will increase for each unit of labor where the wage is greater than the marginal revenue product.

A. Profit will increase for each unit of output where price is greater than marginal cost Both concepts compare marginal revenue and marginal cost and are really identical. When we compare price with marginal​ cost, we are comparing the marginal revenue and marginal cost of an additional unit of output. When we compare marginal revenue product with the wage​ rate, we are comparing the marginal revenue and the marginal cost of an additional unit of labor. If we increase output as long as the price is greater than the marginal​ cost, profit will be maximized at the same level of output that you would arrive at assuming that firms hire workers as long as the marginal revenue product of labor is greater than the market wage.

Inputs are demanded by a firm if and only if households demand the good or service produced by that firm. Which of the following best describes this​ statement? A. Productivity of an input B. Derived demand C. Marginal revenue product D. Marginal product of labor

B. Derived demand

In​ Orlando, Florida, the land value went up dramatically when Disney built its theme park there. How do you explain this land price​ increase? A. The land value could no longer be determined exclusively by the amount the highest bidder was willing to pay. B. The price of land increased because its potential for profit increased. C. The productivity of the land no longer exhibited diminishing marginal returns. D. The price of land increased because the supply of land is perfectly elastic. E. The price of land increased because the landowners could no longer charge pure rent.

B. The price of land increased because its potential for profit increased.

According to the Bureau of Labor​ Statistics, the average weekly earnings of production and nonsupervisory employees in education and health services was​ $822 in March​ 2015, up from​ $671 in March 2006. All else​ equal, such an increase in wages would be expected to reduce the quantity of labor demanded and employment should fall.​ Instead, the quantity demanded for labor has increased dramatically with more than 3.7 million jobs being created between 2006 and 2015. How can you explain this seeming​ discrepancy? A. The price of a substitute input decreased. B. The supply of labor shifted to the right. C. An increase in labor productivity increased labor demand and wages in education and health services. D. Labor became less productive.

C. An increase in labor productivity increased labor demand and wages in education and health services.

A change in the wage rate is represented as a​ ________ the labor supply​ curve, and a change in wealth is represented as a​ ________ the labor supply curve. A. movement​ along; movement along B. shift​ of; movement along C. movement​ along; shift of D. shift​ of; shift of

C. movement​ along; shift of

The factor substitution effect​ is: A. the tendency of firms to substitute away from a factor whose relative price has risen. B. the tendency of firms to substitute toward a factor whose relative price has fallen. C. a reason that the input demand curve slopes downward. D. All of the above

D. All of the above

Which of the following best describes the marginal revenue product of labor ​(MRPL)? A. It is the value of a​ factor's marginal product in a competitive firm. B. It is the revenue produced by selling the good or service that is produced by the marginal unit of labor. C. MRPL ​= MPL x Px D. All of the above.

D. All of the above. Marginal revenue product is the revenue produced by selling the good or service that is produced by the marginal unit of labor. In a competitive​ firm, marginal revenue product is the value of a​ factors marginal product. If we use labor as our variable​ factor, we can state this proposition more formally by saying that if MPL is the marginal product of labor and PX is the price of​ output, then the marginal revenue product of labor​ is: MPL x Px

Many states provide firms with an​ "investment tax​ credit" that effectively reduces the price of capital. In​ theory, these credits are designed to stimulate new investment and thus create jobs. Critics have argued that if there are strong factor substitution effects ​, these subsidies could reduce employment in the state. Explain their arguments. A. Investment tax credits reduce the cost of labor relative to the cost of capital. B. Investment tax credits do not affect employment. C. Investment tax credits increase the cost of capital relative to the cost of labor. D. Investment tax credits reduce the cost of capital relative to the cost of labor.

D. Investment tax credits reduce the cost of capital relative to the cost of labor.

For a given​ firm, MRPL ​= ​$125 and MRPk ​= ​$275 while PL ​= ​$50 and Pk ​= ​$20 Is the firm maximizing​ profits? Why or why​ not? A. Yes, because (MRPL/PL) is less than (MRPk/Pk) B. Yes, because (MRPL/PL) is equal to (MRPk/Pk) C. No, because (MRPL/PL) is greater than (MRPk/Pk) D. No, because (MRPL/PL) is less than (MRPk/Pk)

D. No, because (MRPL/PL) is less than (MRPk/Pk)

Because the price of land is demand​ determined: A. the price determines demand. B. demand determines supply. C. demand sets the quantity. D. the price depends only on changes in demand.

D. the price depends only on changes in demand. Because land is in strictly fixed​ supply, its price is demand determined —that ​is, its price is determined exclusively by what households and firms are willing to pay for it.

What is derived demand?

Derived demand is the demand for inputs that is dependent on the demand for the outputs those inputs can be used to produce.

The short run is a period of time during which a __________ factor of production limits a​ firm's capacity to expand. This suggests that as variable inputs​ increase, all things​ equal: A. the total product will equal the marginal product of fixed inputs. B. the marginal product of variable inputs will decrease. C. the total product will decrease. D. the marginal product of labor will increase.

Fixed; B. the marginal product of variable inputs will decrease. - In a​ fixed-scale plant, the marginal product of variable inputs such as labor will eventually decrease.

What is the equation used to find Marginal Product of Labor (MPL)?

MPL = Change in Total output

What is the equation used to find Marginal Product Revenue of Labor (MPRL)?

MPRL = Marginal Product of Labor (MPL) x Product Price