Macroeconomics Final Study Set
According to your diagram, the profit-maximizing level of employment for this firm is _____ workers.
4
How do labor-saving technologies differ from labor-complementary technologies? Complete the following table by identifying the two types of technological change. (Use LST for labor-saving technology or LCT for labor-complementary technology.)
All of the above check doc for table
How will this law affect firms' demand for labor? Suppose workers consider a dollara dollar of health insurance paid by firms to be the equivalent of $11 in wages. How will this law affect the supply curve of labor? 1.) Using the line drawing tool, illustrate the shifts that produce the labor market's new equilibrium. Properly label your curves. How will this law affect the equilibrium quantity of labor in this labor market? How will it affect the equilibrium wage in this industry? According to your graph, the equilibrium wage ____ and the equilibrium quantity _______. How will this law affect the equilibrium quantity of labor in this labor market? How will it affect the equilibrium wage in this industry?
Demand for labor will shift down by $1 Supply of labor will shift down by $1 check doc for graph falls; stays the same The equilibrium wage and quantity both decline, with the wage declining less than in the previous case where workers consider the insurance to be the equivalent of $11 in wages.
Suppose wages in the market for plumbers increase. Some plumbers start taking on extra plumbing jobs while others cut back on the number of hours they work. What could explain this?
For those plumbers who choose to work more, the substitution effect (on leisure) of the wage increase is stronger than the income effect. For those who decided to work less, the reverse is true.
Consider a typical-looking labor market with a downward-sloping aggregate VMPL (labor demand) and an upward sloping labor supply curve as shown in the adjacent graph. 1.) Using the point drawing tool, label the part of this VMPL curve that maximizes total productivity. Label this point 'a'. 2.) Using the point drawing tool, label the part of this VMPL curve that maximizes average productivity (i.e., output per worker). Label this point 'b'. 3.) Using the point drawing tool, label the market equilibrium. Label this point 'c'. If you were to add a binding minimum wage to the adjacent graph it would be represented as ___. A binding minimum wage will ___________ the marginal product of labor.
check doc for graph a horizontal line above point c increase
How would the following factors affect equilibrium in the market for labor?
check doc for table
Joey, Mandy, and Jim have the following labor supply (hours per day, based on hourly pay). _______ values leisure the most because he or she is willing to supply the ____________. Suppose the wage is $10. Total labor supply is ____hours. Suppose the demand for labor was fixed at 32 (i.e., firms wanted a total of 32 hours per day, regardless of the wage). The equilibrium wage would be _____.
check doc for table Joey values leisure the most because he or she is willing to supply the least amount of labor for any given wage 21 hours $15
Mermaid Corporation had employed some number of workers at an equilibrium given by point E in the graph. In the following year, the firm implemented a labor-saving technology that is a substitute for labor. As a result, the equilibrium wage rate _____________. Using the three-point curve drawing tool, show the case described above by shifting the appropriate curve. Properly label your curve. It was observed that the poor marketing skills of a toy company named Hamleys decreased the demand for their toys, which caused the leftward shift in the demand curve of toys. This shift ___________ the equilibrium price of the toys. Such a change in the price of toys will cause the VMPL and wages to _________, leading to the ________ in the demand curve for labor.
falls check doc for graph decreases decrease; leftward shift
The figure on the right shows the market for labor in a given industry. The demand curve is downward-sloping because marginal productivity _________ as more workers are employed, while the supply curve is upward-sloping since an increase in the wage increases the opportunity cost of _______. Now suppose that the price of the product being produced the price of the product being produced decreases, all else constant. 1.) Using the line drawing tool, show the impact of this event. Label your curve appropriately. According to the graph, the consequence of the change in price is a _________ market wage and a _________ level of employment.
falls, leisure check doc for graph lower; lower
Technologies that substitute for substitute for existing labor inputs are known as _________________. With this type of technological change, the marginal productivity of existing labor inputs will __________. 1.) Using the line drawing tool, show the impact of this new technology. Label your curve appropriately. The consequence for workers will be a wage rate that is _______ and hours of employment that are __________.
labor-saving technologies decrease check doc for graph higher; lower
The figure on the right shows the market for labor in a given industry. The demand curve slopes downward because _______ productivity falls as more workers are employed. The supply curve slopes upward since the opportunity cost of leisure _______ following an increase in the wage.
marginal rises check doc for graph higher; lower
The following table gives the value of marginal product of labor (VMPL) for a competitive firm. Because this firm is competitive and has no control over its product's price, the declining values for VMPL are a result of diminishing __________ (marginal productivity/average productivity/total productivity). When the VMPL is plotted in a diagram with the number of workers measured along the horizontal axis, the resulting curve (connecting the plotted points) is the firm's ______________ (demand for labor/supply of labor/production frontier). 1.) Using the line drawing tool in the diagram on the right, draw the firm's demand for labor. 2.) Using the line drawing tool, draw the line reflecting the market wage rate of $60.
marginal productivity demand for labor check doc for graph
If the population in an area were to increase, it is likely that the supply of labor curve would shift _______ causing wages to ________. This would likely result in ___________ available jobs.
rightward; decrease; more
Derived demand is the demand a firm has for ____________. Suppose the demand for economics courses at your school increases, all else constant. In this case, the school's administrators will seek to hire ________ (more/fewer) economics instructors.
the factors of production that enable it to produce output that is sold in product markets. more
A production function shows ____________. According to the Law of Diminishing Returns, ____________. Using the 3-point curved line tool, add a production function to the graph on the right. Only draw it up to the point of diminishing returns.
the number of workers employed and the corresponding output levels that will be produced. the marginal productivity of an additional unit of labor eventually decreases as the quantity of labor increases.
In a competitive labor market, the profit-maximizing number of workers that a firm will hire occurs where the ____________.
value of marginal product of labor is equal to the market wage.
A profit-maximizing firm will hire workers until the _____________ (marginal product of labor (MPL)/value of the marginal product of labor (VMPL)) ___________ (wage/ price). To hire beyond that would mean the firm would be paying the worker ___________ (more/less) than the worker's contribution to the firm.
value of the marginal product of labor (VMPL) wage more (For a firm to be optimally purchasing labor—not paying more than the labor is worth—it must only expand its workforce until the value of the marginal product of labor (VMPL) is equal to the wage of the worker.)
In the United States in 2011, there were 104 fatalities per 100,000 workers in the logging industry. This is the second-highest rate after the fisheries industry. Everything else equal, would you expect workers in the logging industry to be paid higher wages than workers with similar levels of education in other industries? Explain.
Yes, loggers should be paid higher wages to compensate for risk.
