Ch. 11 The Labor Market

Question 1

Marginal Product of Labor

Answer 1

The extra production that occurs from hiring an extra worker

Question 2

Marginal Revenue Product

Answer 2

Measures the marginal revenue from hiring an additional worker
Marginal Product of Labor x Price

Question 3

Rational Rule for Employers

Answer 3

Hire an additional worker if their marginal revenue product is greater than or equal to the wage

Question 4

Derived Demand

Answer 4

The demand for an input derives from the demand for the stuff that puts produces

Question 5

Labor Supply

Answer 5

The time you spend working in the market

Question 6

Rational Rule for Workers

Answer 6

Work one more hour as long as the wage is at least as large as the marginal benefit of another hour of leisure

Question 7

Substitution Effect

Answer 7

Described how people respond to a change in relative prices; higher wage increases return to work rather than leisure

Question 8

Income Effect

Answer 8

Describes how peoples choices change when they have more income; increased income means you chose more leisure

Question 9

Physical Capital

Answer 9

Tools, machinery and structures that are inputs in the production process