Ch. 16 The Labor Market ⭐️

Marginal physical product ___ as more workers are hired

Decliens

As marginal physical product diminishes, marginal revenue produc

Does too

The demand curve for labor slopes

Downward

Government intervention on CEO pay shouldn't be necessary if markets are ___

Efficient

republicans argue labor demand is

Elastic

the quantity of resources purchased by a business depends on the firm's_____ sales and output

Expected

At a ___ wage, workers are willing to work ___ Hours

Higher, more

There has been a long run ___ shift in the average workers supply of labor curve

Leftward

the opportunity cost of working is the amount of____ time that must be given up in the process.

Leisure

The quantity of labor supplied at any given wage rate depends on the value of ___ and the desire for ____

Leisure, income

If income effects outweigh substitution effects, an individual will supply____ labor at higher wages

Less

People receiving very low wages (such as migrant workers, household help, and babysitters) have to work really_____ hours just to pay the rent

Long

the further the minimum wage rises above the market's equilibrium wage, the greater the job___

Loss

An employer is willing to pay a worker _____ than the marginal revenue product

No more

Each (identical) worker is worth____ than the marginal revenue product of the last worker hired, and all workers are paid the same wage rate.

No more

Critics conclude that many CEO paychecks are_________

Out of line

Adjustments in work hours are more commonly confined to choices about_____ work or secondary jobs (moonlighting) and vacation and retirement

Overtime

There's a ___ between wage rates and the number of workers demanded

Trade off

If strawberry prices were to double, strawberry pickers would become____ as valuable, even without an increase in physical productivity.

Twice

The labor supply curve has an

Upward slope

Labor intensive

Uses the more labor than capital

Price floor

lower limit set for the price of a good

Wage rate

price of labor

market surplus

the amount by which the quantity supplied exceeds the quantity demanded at a given price; excess supply

Cost efficiency

the amount of output associated with an additional dollar spent on input; the MPP of an input divided by its price (cost)

Marginal physical product

the change in total output associated with one additional unit of input

Marginal Revenue Product

the change in total revenue associated with one additional unit of input

efficiency decision

the choice of a production process for any given rate of output

derived demand

the demand for labor and other factors of production results from (depends on) the demand for final goods and services produced by these factors

opportunity wage

the highest wage an individual would earn in his or her best alternative job

Capital intensive

using more capital than labor in the production process

Elasticity of labor supply=

%change in quantity of labor supplied/% change in wage rate

Contributing to this long-run leftward shift in the market a supply curve has been

(1) the spectacular rise in living standards (a change in income and wealth), (2) the growth of income transfer programs that provide economic security when one isn't Page 339working (a change in income and expectations), and (3) the increased diversity and attractiveness of leisure activities (a change in tastes and other goods).

Marginal revenue product=

-Change in total revenue/ change in quantity of labor -marginal physical product x price

The upward slope of an individual's labor supply curve is therefore explained by the fact that as hours worked increase,

-The value of leisure time increases. -The marginal utility of income decreases.

The reward for working comes in two forms

1. The intrinsic satisfaction of working 2. Paycheck

Determinants of labor supply include

1.tastes (for leisure, income, work) 2.income and wealth 3.expectations (for income or consumption) 4.prices of consumer goods 5.taxes

If the elasticity of labor is 0.2, a 10 percent increase in wage rates will induce a____ percent increase in the quantity of labor supplied.

2

In 2016 the average worker worked fewer than_____ hours per week at a wage rate of $22 an hour

35

In 1890 the average U.S. worker was employed____ hours a week at a wage rate of 20 cents an hour.

60

a firm that's a perfect competitor in the labor market can hire___ the labor it wants at the prevailing market wage.

All

Backward-Bending Supply Curve of Labor

As the wage rises, the quantity of labor supplied eventually decline; the income effect of a higher wage increases the demand for leisure, which reduces the quantity of labor supplied enough to more than offset the substitution effect of a higher wage.

Some critics want to set up mandatory ___ on CEO pay

Caps

Marginal physical product =

Change in total output/ change in quantity of labor

higher wage rates are required to compensate for the_____ opportunity cost of labor

Increasing

Democrats argue labor demand is

Inelastic

marginal revenue product sets an___ limit to the wage rate an employer will pay.

Ipper

People supply more____ when offered higher wages

Labor

Cost efficiency of labor=

Marginal physical product labor/ cost labor

Cost efficiency=

Marginal physical product of an input/cost of an input

One of the difficulties in determining the appropriate level of CEO pay and presidents pay is the elusiveness of

Marginal revenue product

the grower will continue hiring pickers until the MRP has declined to the level of the____ wage rate

Market

Total quantity of labor that workers are willing and able to supply at alternative wage rates in a given time period, ceteris paribus

Market supply of labor

If the wage rate drops, an employer will be willing to hire___ workers,

More

The marginal utility of income may decline as you earn____

Mroe

Competitive employers act like ____with respect to wages as well as prices

Price takers

To get higher wages without sacrificing jobs,____ (MRP) must increase.

Productivity

If the marginal revenue product of labor improves, the employer will hire a greater____ of labor at any given wage rate

Quantity

A legal minimum wage

Reduces the quantity of labor demanded, and Increases the quantity of labor supplied, and thereby Creates a market surplus.

As we work more hours our leisure becomes more ___ and hence, _____ valuable

Scare, more

Workers respond positively to higher wage rates in the ___ run

Short

The higher the wage rate the ___ the quantity of labor demanded

Smaller

When the _____ effect dominates to income effect, the labor supply curve is upward sloping

Substitution

If the minimum wage exceeds the equilibrium wage, a labor____ will result

Surplus

the market supply of labor depends on

The number of available workers. Each worker's willingness to work at alternative wage rates.

the market demand for labor depends on

The number of employers. The marginal revenue product of labor in each firm and industry.

Equilibrium wage

The wage rate at which the quantity of labor supplied in a given time period equals the quantity of labor demanded

Supply of Labor

The willingness and ability to work specific amounts of time at alternative wage rates in a given time period, ceteris paribus

Production process

a specific combination of resources used to produce a good or service

income effect of higher wages

an increased wage rate allows a person to reduce hours worked without losing income

Substitution effect of higher wages

an increased wage rate encourages people to work more hours (to substitute labor for leisure)

law of diminishing returns

the marginal physical product of a variable input declines as more of it is employed with a given quantity of other (fixed) inputs

elasticity of labor supply

the percentage change in the quantity of labor supplied divided by the percentage change in wage rate

Demand for Labor

the quantities of labor employers are willing and able to hire at alternative wage rates in a given time period

Market supply of labor

the sum of all individuals' supplies of a type of labor; the total quantity of labor people will offer to the market at various wage rates, other things being equal

marginal productivity

the value of the output of the last worker hired by a company

Market supply curve is

upward sloping