unit 5 kms econ
Mr. Cobb, a corn farmer, pays his workers $8 an hour. At his current level of labor use, the marginal product of an additional hour of labor is three bushels of corn. The market price of corn is $2.75. In order to maximize his profits. Mr. Cobb should:
hire more labor because the value of the marginal product exceeds the wage.
Marginal Resource Cost
The change in total cost caused by a one-unit change in an input.
a factor demand curve will shift to the left becase
a decrease in the price of the good the factor produces
value of the marginal product is the:
change in the total output resulting from a unit change in the quantity of a variable input.
an increase in demand for construction workers may come about because of
increase in the demand for new housing
A factor demand curve will shift to the right because of a
increase in the price of the good the factor produces.
the derived demand concept suggests that an increase in the demand of computers will
increase the supply of computer manufacturers.
Shifters of Labor Demand
1. Change in the demand for the product 2. Change in the productivity of the resource 3. Change in the price of related resources (substitute and complementary resources)
Shifters of Labor Supply
1. Number of qualified workers 2. Government regulation/licensing 3. Personal values regarding leisure and societal roles
The firm's demand curve for labor is
its marginal cost curve
a profit-maximizing firm will hire
labor until its wage rate equals its marginal revenue product
people who have higher levels of human capital will tend to:
receive higher salaries than those who have lower levels of human capital.
Suppose all perfectly competitive fast-food firms are hiring the profit-maximizing quantity of labor and are paying their workers $7 per hr. Then suppose the government decides to raise the minimum wage to $8 per hour. then:
since the value of the marginal product would be less than the wage, firms would lay off some of the workers.
If a union is able to bargain for a wage that is higher than the equilibrium, this means that:
some excess supply of labor or unemployment will result at this wage rate.
derived demand
the demand for business products
derived demand for factor means
the demand for factors depends on what the factor can produce.
Marginal Revenue Product
the extra revenue the firm gets from hiring an additional unit of a factor of production
other things equal, the demand for labor will become more elastic
the higher the price of capital
According to the cost-minimization rule, the firm must hire labor and capital to the point where:
the marginal product per dollar is equal to both units
marginal product is
the output of the least skilled worker
The individual producer's labor demand curve is the:
value of marginal product of labor curve
value of marginal product is calculated as
MP / P
The demand for factors of production is called a derived demand because it is:
derived on the basis of questions posed to residents during census