III & II. C. 5 Exam

Question 1

perfectly competitive labor market characteristics (4)

Answer 1

1. many small firms are hiring workers (no one firm is large enough to manipulate the market)
2. many workers with identical skills
3. wage is constant
4. workers are wage takers (can hire as many

Question 2

demand for labor

Answer 2

the different quantities of workers that businesses are willing and able to hire at different wages

Question 3

law of demand for labor

Answer 3

-inverse relationship between wage and quantity of labor demanded

Question 4

supply for labor

Answer 4

the different quantities of individuals that are willing and able to sell their labor at different wages

Question 5

law of supply for labor?

Answer 5

-direct relationship between wage and quantity of labor supplied

Question 6

who demand labor?

Answer 6

firms demand labor

Question 7

who supplies labor?

Answer 7

individuals supply labor

Question 8

in perfect competitive labor market where is the equilibrium wage?

Answer 8

where labor supply equals quantity of labor demanded in the market

Question 9

what is marginal revenue product?

Answer 9

the additional revenue generated by an additional worker (resource)

Question 10

in perfectly competitive product markets the MRP equals the ______ of the resource times the price of the market

Answer 10

• marginal product

* MP X P

Question 11

what is the way to calculate MRP for both competitive labor market or monopsony?

Answer 11

MRP= Change in revenue/ change in inputs

Question 12

marginal resource cost

Answer 12

the additional cost of an additional resource (worker)

Question 13

in perfectly competitive labor markets the MRC = the _______

Answer 13

the wage set by the market and is constant (a horizontal line)

Question 14

a way to find MRC in competitive labor market or monopsony is by….

Answer 14

MRC=change in total cost/ change in inputs

Question 15

how do you know how many resources (workers) to employ?

Answer 15

continue to hire until MRP = MRC

Question 16

why does MRP eventually fall?

Answer 16

diminishing marginal returns

Question 17

each worker is worth _____

Answer 17

the amount of money they generate for the firm

Question 18

what is profit maximization with one resource?

Answer 18

MRP = MRC

Question 19

what three things would change Demand curve

Answer 19

1. (price) demand of the product
2. productivity of the resource
3. price of related resources

Question 20

what three things would change the supply curve?

Answer 20

1. number of qualified workers (education, training, etc)
2. govt regulation/ licensing
3. personal values and traditions regarding leisure time and societal roles

Question 21

characteristics of monopsony (3)

Answer 21

1. one firm is hiring workers
2. workers are relatively immobile
3. firm is wage maker

Question 22

when a firm cant wage discriminate what happens?

Answer 22

their MRC is higher than price because the firm has to pay the price to hire second worker and to raise everyone else’s wage

Question 23

what is profit maximization with two resources? (IN PERFECT COMP LABOR MARKET)

Answer 23

MRP(L)/ P(L) = MRP(C)/ P(C) = 1

Question 24

what is the least cost combination of two resources? (IN PERFECT COMP LABOR MARKET)

Answer 24

MP(L)/ P(L) = MP (C)/P (C)

Question 25

What is the least cost combination of things that are not in perfect competitive labor market?

Answer 25

MP(L)/MRC(L)=MP(K)/MRC(K)

Question 26

What is the profit maximizing combination formula of things that are not in perfect competitive labor market?

Answer 26

MRP(L)/MRC(L)=MRP(K)/MRC(L)=1