1.2: Labor Supply (3.1 & 3.3)

Question 1

production function

Answer 1

fxn which shows relationship b/w effectiveness with which labor and capital may be used

Y = AF (K,N)

Real output = A (overall productivity) x F (fxn relations output Y to capital K,N) K = capital stock, N = number of workers employed in period

A = total factor productivity

Question 2

marginal product of capital (MPK)

Answer 2

increase in output produced that results from a one-unit increase in the capital stock

dY/dK

MPK is positive. It declines as the capital stock is increased.

Question 3

marginal product of labor (MPN)

Answer 3

additional output produced by each additional unit of labor

dY/dN

Question 4

leisure

Answer 4

ALL off-the-clock activities. Eating, sleeping, house-work, time with family and friends

Question 5

An increase in the real wages raises the benefit (in terms of real income) of working an additional hour and thus tends to make the worker want to supply ___ labor

Answer 5

more

Question 6

substitution effect of a higher real wage

Answer 6

tendency of workers to supply more labor in response to a higher reward for working

Question 7

income effect of a higher real wage

Answer 7

tendency of workers to supply less labor in response to becoming wealthier

Question 8

Research on labor supply generally shows that the aggregate amount of labor supplied ______ in response to a permanent increase in real wage.

Answer 8

rises

Question 9

an increase in wealth shifts the labor supply curve to the (left/right)

Answer 9

left