modul 17 Flashcards
What is the marginal revenue product of labor?
The marginal revenue product of labor is the marginal product of labor times the marginal revenue obtained from additional units of output.
What is labor demand?
Labor demand refers to the quantity of labor that firms are willing and able to hire at different wage rates.
What happens to the demand for less-skilled workers when sophisticated technologies are introduced?
The demand for less-skilled workers decreases
What are examples of complementary and substitute factors of production?
Complementary factors of production are inputs that are used together, such as labor and capital. Substitute factors of production are inputs that can be used in place of each other, such as human labor and automation.
What are the determinants of the equilibrium wage and equilibrium quantity of labor in a perfectly competitive market?
The determinants of the equilibrium wage and equilibrium quantity of labor in a perfectly competitive market include the supply of labor, the demand for labor, and the bargaining power of workers and employers.
What are the income and substitution effects of a wage change?
The income effect is the change in the quantity of labor supplied due to a change in income, while the substitution effect is the change in the quantity of labor supplied due to a change in the relative price of leisure and work.
What is the price of leisure?
The wage an individual can earn
What is the impact of a minimum wage on employment?
Decreases employment
How can the government increase wages and incomes?
Implementing minimum wage laws
What forces can raise or lower the equilibrium wage in a competitive market?
Factors such as changes in demand or supply of labor, changes in productivity, and government policies can raise or lower the equilibrium wage.
How can changes in demand and supply impact wages and employment?
An increase in demand and a decrease in supply will lead to higher wages and increased employment.
What determines the number of accountants a firm will hire at each price for accountants?
Marginal revenue product curve
What is the concept of demand and supply in the labor market?
The concept of demand and supply refers to the relationship between the quantity of labor demanded by firms and the quantity of labor supplied by workers.
What is the marginal decision rule and how is it used to determine labor demand?
The marginal decision rule states that a firm will hire additional units of labor as long as the extra output produced by hiring one more unit of labor adds more to total revenue than it adds to total cost. It is used to determine labor demand by comparing the additional revenue generated by hiring more labor to the additional cost of hiring that labor.
What is the definition of labor demand?
The amount that an additional unit of labor adds to a firm’s total revenue during a period
What is labor demand?
Labor demand refers to the quantity of labor that firms are willing and able to hire at different wage rates.
What determines the demand for labor in a perfectly competitive market?
The wage rate
How can the market demand curve for labor be shifted?
By adding more accountants to handle calls
What is the firm’s demand curve for a factor?
The portion of the curve that exhibits diminishing returns
What is the formula for calculating the marginal revenue product of labor (MRPL) in a perfectly competitive market?
MRPL = MPL * P
The amount a factor adds to a firm’s total cost per period is called its ______
marginal factor cost (MFC)
What is the assumption made about labor markets in this chapter?
Perfect competition prevails
What determines equilibrium wages in a perfectly competitive labor market?
The intersection of the demand and supply curves for labor
What is the definition of labor demand and labor supply?
Labor demand refers to the quantity of labor that employers are willing and able to hire at different wage rates, while labor supply refers to the quantity of labor that workers are willing and able to offer at different wage rates.
What is the assumption of perfect competition in labor markets?
The assumption of perfect competition in labor markets means that individual buyers and sellers of labor are price takers, meaning they have no control over the market price and must accept it as given.
Apply the marginal decision rule to determine labor ______ in a perfectly competitive market and illustrate it graphically.
demand
A profit-maximizing firm will base its decision to hire additional units of labor on the __.
marginal decision rule
What determines equilibrium wages in the labor market?
Market forces
What assumption is made when analyzing the labor market as a single market with identical workers?
All workers earn the same wage
What is the concept that represents the change in total cost divided by the change in the quantity of the factor?
Marginal factor cost
How do we find the market demand for labor?
By adding the demand curves for individual firms
Identify factors contributing to the widening wage gap between workers with different ______ levels.
education
How can changes in the use of other factors of production affect the demand for labor?
Increase the demand for labor
If more firms employ a factor, the demand curve shifts to the _
right
What is the relationship between the demand for train travel and the demand for railroad conductors?
A decrease in demand for train travel decreases the demand for railroad conductors
When an increase in the use of one factor of production increases the demand for another, the two factors are ______ factors of production.
complementary
What happens to the demand for less-skilled workers when sophisticated technologies are introduced?
The demand for less-skilled workers decreases
Factor demand is ______ from the demand for the product that uses the factor in its production.
derived
What factors can shift a firm’s demand curve for labor?
Changes in the quantities of other factors employed
How can changes in the number of firms affect the demand for labor?
Increase the demand for labor
What can cause a shift in a firm’s demand curve for labor?
Changes in the price of other factors of production
What is the concept of derived demand for factors of production?
The demand for factors of production that is derived from the demand for the final product
Technological changes can increase the demand for some workers and ______ the demand for others.
reduce
What are complementary factors of production?
Factors that increase the demand for each other
What is factor demand derived from?
The demand for the product that uses the factor in its production
How can technological changes impact the demand for different kinds of labor?
Increase the demand for some kinds of labor and decrease the demand for others
What is a substitute factor of production?
A factor of production that can be easily replaced by another factor
What is a firm’s demand curve for a factor?
The portion of the marginal revenue product curve that is downward-sloping
The marginal revenue product of labor equals the marginal product of labor times the ______ of the good being produced.
price
How do changes in product demand affect the demand for factors of production?
An increase in product demand increases the demand for factors of production
How can changes in product demand affect the demand for factors of production?
Increase the demand for factors of production
What is derived demand for factors of production?
Derived demand refers to the demand for factors of production that is derived from the demand for the final product that uses those factors in its production.
How does changes in product demand affect the demand for factors of production?
Changes in product demand directly affect the demand for factors of production, as factor demand is derived from the demand for the final product.
The equilibrium wage and equilibrium quantity of labor in a perfectly competitive market are determined by the intersection of the ______ curve and the demand curve for labor.
supply
The supply of labor is a problem in which individuals weigh the _ of various activities.
opportunity cost
The equilibrium wage and equilibrium quantity of labor in a perfectly competitive market are determined by the _ of labor supply and labor demand.
intersection
What factors can cause the supply curve for labor to shift?
Changes in the demand for labor
What is the substitution effect of a higher wage?
Consumers substitute labor for leisure
What is the concept of opportunity cost related to in the supply of labor?
Tradeoff between leisure and income
What is the concept of opportunity cost and its relation to the supply of labor?
Opportunity cost refers to the value of the next best alternative that is forgone when making a decision. In the supply of labor, individuals must weigh the opportunity cost of leisure (time not spent working) against the income they can earn from working.
How does a change in wages in related occupations affect the supply of labor?
It depends on the specific occupation
The substitution effect of a wage increase always __ the amount of leisure time consumed and ____ the amount of time spent working.
reduces, increases
What is the relationship between the demand for leisure and the supply of labor?
As the demand for leisure increases, the supply of labor decreases
What are the two effects of a wage change on the labor supply curve?
Income effect and substitution effect
How does a higher wage affect the quantity of labor supplied?
It reduces the quantity supplied through the income effect
It increases the quantity supplied through the substitution effect
The effects of the income and substitution effects pull the quantity of labor supplied in _ directions.
opposite
How does a higher wage affect the quantity of leisure demanded?
It increases the quantity of leisure demanded
What is the concept of opportunity cost and how is it related to the supply of labor?
Opportunity cost refers to the value of the next best alternative foregone when making a decision. In the context of the supply of labor, individuals face a tradeoff between leisure and income, and the opportunity cost of supplying labor is the leisure that could have been enjoyed instead.
What are the two effects of a wage change on the quantity of labor supplied?
Substitution and income effects
How do the substitution and income effects affect the shape of the labor supply curve?
They make it flatter
How do the income and substitution effects affect the shape of the labor supply curve?
The income effect tends to increase the quantity of labor supplied, while the substitution effect tends to decrease the quantity of labor supplied. The combined effect determines the shape of the labor supply curve.
What is the price of leisure?
The wage an individual can earn
What is the relationship between leisure and income in the supply of labor?
There is a tradeoff between leisure and income
What determines the shape of an individual’s supply curve for labor?
The individual’s preferences for leisure
What is the purpose of imposing a minimum wage?
To increase wages
What is the impact of a higher minimum wage on the demand for labor?
Increases the demand for labor
What can cause an increase in the equilibrium wage in a competitive market?
An increase in demand for labor
In perfect competition, each firm is a ______ taker.
price
What can raise or lower the equilibrium wage in a competitive market?
Changes in population
What can cause an increase in the equilibrium wage?
Increase in demand
What determines wage and employment levels in a perfectly competitive market?
Supply and demand forces
What determines wages in a competitive market?
Demand and supply
Government can increase wages and incomes through ______.
policies
How are wages determined in a perfectly competitive market?
By the intersection of demand and supply
What is the impact of an increase in the supply of labor on employment and wages?
Increase in employment and decrease in wages
How can the government increase wages and incomes?
Implementing minimum wage laws
What are some ways that the government can increase wages and incomes?
The government can increase wages and incomes through policies such as minimum wage laws, income redistribution programs, and providing education and training opportunities.
What forces can raise or lower the equilibrium wage in a competitive market?
Factors such as changes in demand or supply of labor, changes in productivity, and government policies can raise or lower the equilibrium wage.
How are wage and employment levels determined in a perfectly competitive market?
Wage and employment levels are determined by the intersection of the demand and supply curves for labor.
What factors determine a firm’s demand for labor?
The factors that determine a firm’s demand for labor include the price of the firm’s output, the productivity of labor, and the prices of other inputs.
Some economists oppose increases in the minimum wage on grounds that such increases boost ______.
unemployment
A firm’s demand for labor is determined by the ______ it can generate from hiring an additional worker.
revenue
The market demand curve for labor is derived from the demand curves of ______ firms.
individual
What determines a firm’s demand for labor?
The marginal product of labor and the price of the good the firm produces
What can cause a decrease in the equilibrium wage in a competitive market?
Increase in supply
