ECON 3200 HW3

the firm's production function, f(E,K), specifies

how much output is produced by any combination of labor and capital

the empirical estimates of the short run and long run elasticities of labor demand suggest that the long run elasticity is more elastic that the short run elasticity. the empirical result is

expected, as firms have more options in the long-run to account for changes in labor cost

when a competitive firm encounters a wage change, the optimal isocost line for the firm shirts

because a profit maximizing firm will likely change its total expenditures

the most common criticism of marginal productive theory is that

firms do make hiring decisions according to the theory in that they do not calculate each worker's value of marginal product

over half of all job creation in the U.S comes from

firms that employ more than 500 works

the main problem that an instrumental variables estimation technique is trying to address when estimating supply or demand parameters is that

both the supply and the demand equations are likely shifting at the same time

If the wage goes up, competitive firms will continue using the same ratio of capital to labor if

capital and labor are perfect complements

when the price of labor fails, the firm responds by

increasing employment and output

according to Marshall's rules of derived demand, labor demand is more elastic the ___ the elasticity of substitution

greater (in absolute value)

empirical estimates of the short-run elasticity of labor demand hover around

-0.5

empirical estimates of the long-run elasticity of labor demand hover around

-1.0

which of the following would tend to decrease the hours of labor demanded by competitive firms?

higher market wage rates

the the short run, a competitive firm chooses

its labor input

Marshall's first rule of derived demand is that labor demand is more elastic the greater the elasticity of substitution. In this case, the "elasticity of substitution" refers to the elasticity of substitution between

labor and capital

Marshall's third rule of derived labor demand could be expressed as "the importance of being unimportant." This implication of this law is that

labor's demand for higher wages is more readily granted by the firm when labor costs are small

adjusting costs refer to the costs firms pay when they

reduce or expand their labor force

the margin product of labor is

the additional units of output created by the firm when it employs one more unit of labor

Marshall's second rule of derived labor demand is that labor demand is more elastic the greater

the elasticity of demand for the firm's output

Suppose a firm pays an hourly wage rate of w and fixed cost of F for every worker employed. How will the firm adjust its workforce when F increases

the firm will hire fewer workers in order to pay F less often

Marshall's third rule of derived labor demand is that labor demand is more elastic

the greater labor's share in total costs

marshall's fourth rule of derived labor demand states that the demand for labor is more elastic

the greater the supply elasticity of other factors of production

if a certain group of workers is a complement with robots and the price of robots decreases

the negative cross elasticity will increase the demand of these workers

the elasticity of substitution is

the percent change in the capital/labor ratio resulting from a 1 percent change in the price of labor relative to the price of capital

two isoquants that intersect would mean that

the same input combination produces 2 different levels of output

which of the following statements about the short-run elasticity of labor demand is not true

the short-run elasticity of labor demand equals the slope of the short-run labor demand curve

the greater a firm's variable adjustment costs,

the slower the firm changes the size of its workforce

When the competitive firms adds a marginal hour of labor, all of the following go up, except

wage

in order to maximize profits, a competitive firm that competitively hires labor at the constant wage of w chooses to hire workers up to the point where w=VMPe, this condition

would not hold if VMPe was increasing

which of the following is not an appropriate definition of equilibrium wage?

a market-clearing wage at which everyone has a job

an isocost line plots

all labor and capital combinations that are all associated with the same total cost to the firm

Living wage ordinances passed by local (city) governments typically apply to

all municipal workers and workers in firms that have business dealing with the city

A binding minimum wage decreases the quantity of labor demand, unless

demand is perfectly inelastic