Econ 380 chp 5
If a 3% increase in wages leads to a 2% decrease in the quantity of labor demanded, then the wage elasticity coefficient is _____.
0.67
If a 3% increase in wages leads to a 4% decrease in the quantity of labor demanded, then the wage elasticity coefficient is _____.
1.33, and labor demand is elastic
Consider the short-run production function TP = √K×LK×L where K is fixed at 100. If the current level of labor is L = 4, what is the approximate value of the marginal product of labor? (Round your answer to one decimal place.)
2.7
Consider the short-run production function TP = K×L⎯⎯⎯⎯⎯⎯⎯⎯⎯√K×L where K is fixed at 100. If the current level of labor is L = 4, what is the value of the firm's total product?
20
Consider the short-run production function TP = √K×LK×L where K is fixed at 100. If the current level of labor is L = 4, what is the value of the average product of labor?
5
Consider the short-run production function TP = 2K × L⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯√K × L where K is fixed at 125. If the current level of labor is L = 5, what is the value of the firm's total product?
50
Which of the following is a reason for the marginal product of labor to eventually fall as the quantity of labor increases?
Declining amount of capital per worker
For a firm that sells its output in perfect competition, labor's MRP equals its VMP because _____.
P equals MR
Compared to workers whose employers have inelastic demand for labor, workers whose employers have elastic demand for labor are more likely to _____.
accept wage concessions to save jobs
All else being equal, an increase in the number of firms competing for a certain type of labor will immediately cause _____.
an increase in the market demand for that labor
Compared to workers whose employers have elastic demand for labor, workers whose employers have inelastic demand for labor are more likely to _____.
bargain aggressively for higher wages
Because the marginal product of labor is calculated given a fixed amount of capital, it must eventually _____.
begin to fall
If labor and capital are gross complements, an increase in the price of capital will _____.
cause a decrease in the demand for labor, all else being equal
If labor and capital are gross substitutes, then an increase in the price of capital will _____.
cause an increase in the demand for labor, all else being equal
Refer to the diagram. Increasing labor in Stage II will cause the efficiency of labor to _____ and the efficiency of capital to _____.
decrease; increase
Suppose a firm will hire 10 workers at a wage of $80 per day and only 8 workers at a wage of $90 per day. This firm's demand for labor is _____.
elastic
If the wage rate of labor increases, the substitution effect will cause firms to _____.
employ less labor in the long run only
Refer to the diagram. A profit-maximizing, perfectly competitive firm will produce in Stage III because the firm can always increase the efficiency of both labor and capital by producing more in Stage III.
false
As a monopoly firm hires more labor, the marginal revenue product (MRP) of the firm falls _____.
for two reasons: the marginal product of labor falls and the product price falls
Refer to the production function labeled TP in the diagram. Which of the following are true of the marginal product of labor in Stage IA? (Select all that apply.)
greater than the average product positive rising
Suppose the price of capital falls and as a result firms begin to increase the amount of labor they employ. All else being equal, this would imply that labor and capital are ________ ________
gross, compliment
Suppose the price of capital falls and as a result firms begin to reduce the amount of labor they employ. All else equal, this would imply that labor and capital are ________ ________
gross, sub
Using a horizontal summation of individual labor demand curves to find the market demand curve for labor is _____.
incorrect because the horizontal summation of the individual labor demand curves ignores potential changes in the product price
Because of the impact of a potential change in the wage rate on the product price, the market demand curve for labor is _____ than the curve one would arrive at by horizontally summing all individual labor demand curves.
less elastic, or steeper,
Suppose a firm's total wage bill rises when the wage rate rises. The wage elasticity coefficient for this firm is _____.
less than 1
Refer to the production function labeled TP in the diagram. Which of the following are true of the marginal product of labor in Stage II? (Select all that apply.)
less than the average product positive falling
An increase in the wage rate of labor will cause the greatest decrease in the amount of labor employed by the firm during the __________ ___________-, when both the output effect and the substitution effect apply. (Enter one word in each blank.)
long run
The labor demand curves for _____ firms tend to be less elastic than labor demand curves for _____ firms.
monopoly; perfectly competitive
Product demand tends to be more elastic in the long run. For this reason, labor demand tends to be _____.
more elastic in the long run
Because both the output effect and the substitution effect apply during the long run, the long-run demand for labor tends to be _____.
more elastic than the short-run demand for labor
Refer to the production function labeled TP in the diagram. Which of the following are true of the average product of labor in Stage III? (Select all that apply.)
positive falling greater than the marginal product
Refer to the production function labeled TP in the diagram. Which of the following are true of the average product of labor in Stage II? (Select all that apply.)
positive greater than the marginal product falling
Refer to the production function labeled TP in the diagram. Which of the following are true of the average product of labor in Stage IA? (Select all that apply.)
rising less than the marginal product positive
Refer to the production function labeled TP in the diagram. Which of the following are true of the average product of labor in Stage IB? (Select all that apply.)
rising positive less than the marginal product
All else being equal, an increase in the number of firms entering a market will _____.
shift the market demand curve for labor rightward
Refer to the diagram. A profit-maximizing, perfectly competitive firm will choose a point on the production function in _____.
stage II
For a firm that sells in perfect competition, which of the following are equivalent to the firm's demand for labor? (Select all that apply.)
the VMP of labor the MRP of labor
If the marginal product of labor is greater than the average product of labor, then _____.
the average product of labor must be rising
derived demand
the demand for business products
Suppose the productivity of workers of Type Y increases, but the productivity of workers of Type Z remains unchanged. This will cause _____.
the demand for the labor of Type Y workers to increase
Suppose the demand for Product X increases. This will cause _____.
the demand for the labor that produces Product X to increase, all else being equal
An increase in productivity of labor increases the demand for that labor because _____.
the increase in productivity directly increases the MRP of labor
When employers are quite responsive to a change in wage rates, it means that _____.
the labor demand is elastic
If the average product of labor is falling, then _____.
the marginal product of labor must be less than the average product of labor
In the short run, a firm will respond to a wage change by changing the level of employment consistent with _____; in the long run, the firm will change the level of employment consistent with _____.
the output effect only; the output and substitution effects
Refer to the diagram. A profit-maximizing, perfectly competitive firm will not produce in Stage I because the firm can always increase the efficiency of both labor and capital by producing more in Stage I.
true
Suppose a firm's total wage bill changes by 10% when the wage rate changes by 7.5%. The wage elasticity coefficient for this firm is _____.
unknown