econ exam 3 ch 10
if a pet grooming salon hires an additional groomer, she can groom 4 additional pets. the average grooming fee is $25. the most the salon would be willing to pay is
$100
explain the marginal revenue product of labor
- MRPl = MPl x Px - it is the revenue produced by selling the good or service that is produced by the marginal unit of labor - it is the value of a factor's marginal product in a competitive firm
the oil spill was devastating to many industries, one of the hardest hit being the oyster industry. how did this effect the following: - the price of oysters will... -the marginal product of oyster fishermen will... -the demand for oyster fishermen will...
-the price of oysters will increase -decrease -be unknown, because the MRP will increase due to price changes and decrease due to marginal product changes
what are the characteristics of a competitive labor market
1. many firms demanding and many households supplying 2. workers can create the same value to firms 3. free entry and exit
How do you calculate a firm's MRP
MP x Px
How do you calculate MRPl
MPl x Px
what is a resource market
a market where a business can go and purchase resources to produce goods and services
If the wage is $4.00 how many employees will the firm hire? (look at number 7 chart)
a profit maximizing firm will hire workers as long as the marginal revenue product of labor is greater than the market price of the input/wage. so only the ones that are higher than $4
how is MRPl calculated
by taking the MPl multiplied by the current price of the output - change in product x current price
How do you find MRPl
change in total product x output price
because the price of land is demand determined, the price depends only on...
changes in demand
if the price of the product produced by labor increases, the marginal revenue product of labor curve will
shift to the right
the marginal revenue product of labor is
the additional revenue a firm earns by employing one additional unit of labor
the marginal revenue product measures what
the benefit to the firm from hiring an additional unit of labor
firm's will employ an input up to the point where
the input's price equals its marginal revenue product
the marginal cost of a unit of labor in a perfectly competitive labor market is
the market wage rate
In Orlando, FL, the land value went up dramatically when disney built its theme park there. How do you explain this land price increase
the price of land increased because its potential for profit increased
how do you find the market demand for labor
the sum of each firm's Marginal Revenue Product of Labor curves - MRP = MP x P
if the supply of labor increases, what happens
the wage rate will fall and firms will increase employment up until the point where MRP = the new wage rate
if the supply of labor decreases what happens
the wage rate will increase and firms will decrease employment to the point where MRP equals the new wage rate
How do you find how many workers to hire when given a chart
you find the MPl (change in total for the previous column) and then multiply that by the price/per whatever the problem tells you. then you go to the chart you've created and match number of workers with the MRPl
a sharp increase in interest rates on new home mortgages reduces the demand for new houses - as a result, construction wages will....
decrease
how do firms, regardless of labor market structure, decide how many workers to hire
derived demand
the idea that the demand for autoworkers stems from the demand for automobiles is
derived demand
who demand and who supplies in a resource market
firms demand and households supply
How do firms decide how many workers to hire
firms maximize profit by hiring the last worker whose marginal revenue product of labor (MRP) is greater than or equal to wage
if the wage rate is less than the marginal revenue product of labor, the firm should ___________ to maximize profits
hire more labor and produce more output
the economy of the area booms. office rents rise, increasing demand for new space. - as a result construction wages will
increase
a firm will continue hiring labor as long as the MRP of labor ________ the market wage rate
is greater than or equal to
the marginal revenue product equals what
is the product of the marginal product of labor and the price of the output
the demand for inputs is a derived demand because
it depends on the demand for outputs
if a firm uses only one variable factor of production, what can be said of the marginal revenue product curve
it is the firm's demand curve for that factor in the short run
what is a firm's demand for labor
labor is a derived demand because MRP depends on output markets -MRPl
what is MFC
marginal factor cost; additional cost of employing another unit of the input
tony's lawn service uses only one variable input, fertilizer. the firms demand curve for fertilizer in the short run is the inputs
marginal revenue product curve
what is MRP of labor (MRPl)
marginal revenue product of labor
