Ch 11 Markets For Factors Of Production

Question 1

Value of marginal product of labor

Answer 1

The contribution of an additional worker to a firms revenues, equal to marginal product of labor times the price

Price = wage/ MPL
Equation can be moved around

Question 2

When does a company start hiring workers?

Answer 2

When the value of the marginal product of labor ( marginal product of labor x price) = wage

Question 3

Opportunity cost of leisure

Answer 3

Opportunity cost of the lost wages from not working

Question 4

How to find market supply curve given individual curves

Answer 4

Aggregate the individual supply curves/ sum them horizontally

Question 5

Labor demand shifters

Answer 5

Price if the good

Technology of the firm
Labor saving shifts left, labor complementary shifts right

Question 6

Labor supply shifts

Answer 6

Population changes

Changes in worker preferences and tastes(ex more women working, racists)

Opportunity costs
If other job opportunities diminish, will increase demand for this specific job

Question 7

Human capital

Answer 7

Each persons stock of skills for producing output or economic value

Question 8

Taste based discrimination

Answer 8

People preferences cause then to discriminate against a certain group, affects wages

Question 9

Statistical discrimination

Answer 9

Some observable variable like race helps determine if a person will be a good employee, ex speaking or non speaking engligh

Question 10

Why has wage inequality persisted through fine?

Answer 10

Technological change
Skill busses technologies further increase productivity of skilled workers
Also replaces jobs of unskilled workers

Question 11

VMPK

Answer 11

Value of marginal physical capital, ex renting machines or land
When vmpk = purchasing price of capital, stop purchasing