Review Questions: Labor Markets

In a perfectly competitive labor market, if the value of marginal product of the last worker hired is $20 and the wage rate is $25, then the firm should

hire fewer workers.

Taken together, factors such as education, training, experience, intelligence, and work habits are known as

human capital.

A reduction in workers' marginal productivity would result in

a reduction in the equilibrium wage rate.

Technological advances that increase the marginal product of labor will lead to

an increase in the demand for labor because workers will be more productive.

In a competitive labor market, if a firm pays a worker less than that worker's VMP, then in the long run

competing firms will hire the worker away

To derive the labor demand curve for a particular market, one should for all the firms in the market

horizontally sum the value of the marginal product of labor curves

A decrease in demand for a firm's output results in a(n)

decrease in labor demand.

If technological developments increase the marginal product of labor, then the

demand for labor will increase.

The marginal product of the 14th worker is 8 and the firms sells its output for $4 per unit. If labor is the only variable cost, then the value of the 14th worker's marginal product is

$32

Which of the following factors is not part of an individual's stock of human capital?

Employment status

If demand for the product you make were to suddenly decline, you would expect the equilibrium price of

an increase in the VMP of each worker.

Kyle works for a perfectly competitive firm where he receives a wage rate of $15. From this, one can infer that

Kyle's value of marginal product is at least $15.

The general rule governing the hiring of workers is to

equate marginal labor costs to marginal labor benefits.

In order to maximize its profits, a firm that hires workers in a perfectly competitive labor market will hire workers until the

extra revenue generated from hiring another worker equals the extra cost of hiring that worker.

In competitive labor markets, _______________ demand labor and ________________ supply labor

firms: workers

Suppose the market wage for cashiers increases from $7 per hour to $9 per hour.As a result, Pat, who is a cashier, now works five more hours per week. On the other hand Chris, who is also a cashier, now works five fewer hours per week. Chris's behavior illustrates the effect of a wage increase

income

If the price of each page increases, then the demand for workers will

increase because the value of the marginal product of labor will increase.

The value of a worker's marginal product of labor

is higher for workers with more human capital.

In a competitive labor market, the equilibrium wage rate is determined by

labor demand and labor supply

The additional output a firm gets from hiring an additional unit of labor is the

marginal product of labor

The value of marginal product of a labor equals the

marginal product of labor times the net price for which each unit of output sells

The value of marginal product curve is downward sloping because (a) firms must lower price to sell more

of the law of diminishing returns.

Suppose the market wage for cashiers increases from $7 per hour to $9 per hour.As a result, Pat, who is a cashier, now works five more hours per week. On the other hand Chris, who is also a cashier, now works five fewer hours per week.Pat's behavior illustrates the effect of a wage increase

substitution

If the labor market in the United States is perfectly competitive, the labor supply curve would shift to the right if

the United States relaxed its immigration laws.

A firm is unlikely to hire a worker if

the additional revenue generated by hiring the worker is less than his or her wage.

Suppose it is observed that the equilibrium wage and employment level have both rise in a competitive labor market. One can infer that

the demand for labor has increased.

In the market for labor, the demand function describes

the number of workers a firm is willing to hire at each wage.

A firm's demand for labor will increase if

the price of the firm's output increases.

The optimal number of workers for a perfectly competitive firm to hire occurs when

the wage rate equals the value of marginal product of the last worker.