MICROECON: CHAPTER 12 "LABOR MARKET"

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at low wages the labor supply curve for most people slopes upward because

as wages increase, the opportunity cost of leisure increases

if national laws protecting the health and safety of workers completely eliminate any and all risk, then

compensating wage differentials disappear and workers in risky occupations may be no better off

a firm will employ an additional unit of labor as long as the employment of labor adds more to the firm's revenue than it does to the firm's

cost

the demand for a factor of production depends on the

demand for the products it helps to produce

marginal revenue product of labor for a competitive seller is

equal to the marginal product of labor multiplied by output price

workers in dynamite receive higher wages than if they worked in other jobs that require some level of skills

example of compensating wage differentials

compensating differentials are

higher wages that compensate workers for unpleasant aspects of a job

firms use information on labor's marginal revenue on labor's marginal revenue product to determine

how many workers to hire at each wage rate

a worker's accumulated investment in education, training, experience and health is called

human capital

the combined effect (both income and substitution) of a wage increase is that

if the substitution effect outweighs the income effect, the labor supply curve slopes upward, but if the income effect outweighs the substitution effect, the labor supply curve is backward-bending

on-the-job training received by an apprentice electrician

is a good example of an investment in human capital

the most accurate definition of a worker's "marginal revenue product"

is the change in firm's total revenue as the result of hiring an additional worker

the demand for labor is described as a derived demand because

its derived from the demand for products that use labor in the production process

the substitution effect of a wage increase is observed when

leisure's higher opportunity cost causes workers to take less leisure and work more

one reason the supply of carpenters is greater than the supply of physicians is because

of differences in human capital

painters who pant water towers earn higher wages relative to painters who paint houses because

painting water towers is more risky

if the price of labor falls, we can expect

quantity demanded of labor will increase

an increase in demand for a product will shift the demand for labor used to produce the product

rightward

an individual's labor supply curve shows

shows the relationship between wages and the quantity of labor that she's willing to supply

demand in factor markets differ from demand in product markets in that

the demand for a factor of production is influenced by workers' productivity and by producers expected sales revenues, not by tastes or preferences of consumers

the income effect of a wage increase is observed when

the higher wage income causes workers to take more leisure time and work less

the difference between labor's marginal product and marginal revenue is

the marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue

the marginal revenue product of a resource is

the marginal product of the resource multiplied by the price of the product it helps to produce

firms should hire additional units of a resource as long as

the marginal revenue product of the resource exceeds the cost of an additional unit of the resource

if Molly Bee increases her work hours, when her wage increases

the substitution effect of the wage increase outweighs the income effect

true or false that:

the typical labor supply curve is upward sloping

if "Alan Shaw" reduces his work hours when his salary increases

then the income effect of his salary increase dominates the substitution effect

a union may attempt to obtain stricter certification requirements or longer apprenticeships, which would raise worker's wages because

they shift the labor supply curve leftward


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