More! Flashcards
Labor demand in the long run
To maximize profits the firm must adjust..?
Both labor and capital so that marginal revenue product of each equals its marginal expense.
The demand for labor can be analyzed in terms of either..?
Real or money wages
Which version of demand analysis used is based on convenience
The firms demand for labor in the short run is equivalent to the downward-sloping segment of its MP(L) schedule
W/MP(L) =C/MP(K)
Represents profit maximization in long or short run?
Long run
The firms profit maximizing level of output will fall, and the associated reduction in required inputs (both capital and labor) is an example of the..?
Scale effect
The rise in W also causes the firm to substitute capital for labor so that it can again produce in the least-cost manner;
Changing the mix of capital and labor in the production process is an example of the..?
Substitutional effect
The scale and substitutional effects of a wage increase will have an ambiguous effect on the firm’s desired stock of c……, but both effects serve to reduce the demand for L….
Capital, labor
Labor can be categorized by a, e l, and o
Age, education level, and occupation
If an increase in the price of one input shifts the demand for another input to the left the scale effect has dominated the substitution effect, and the two inputs are said to be…?
Gross compliments
If the increase shifts the demand for the other input to the right the substitution effect has dominated, and the two inputs are..?
Gross substitutes
If the two inputs must be used together they are called..?
Reduced use in one = reduced use in the other
No substitution effect, only a scale!
The two inputs must be gross compliments, always!
Perfect compliments or complements in production
Snow plows & skilled workers
Product-market monopolies are subject to the market demand curve for their output, and they therefore do not take output price as given.
They can expand their sales only by..?
Reducing product price,
Which means that their marginal revenue (MR) from an extra unit of output is less than product price (P)
To a monopoly that searches for workers in a competitive labor market, the monopolist would hire workers until its marginal revenue product of labor….?
Equals the wage rate
MRP(L) = MR * MP(L) = W
Express short run demand for labor by:
MR/P * MP(L) = W/P
-since MR is always less than a monopolies product price, the ratio MR/P is less than 1
The w… monopolies pay aren’t necessarily different from competitive levels even though employment levels are.
Wage
Programs that subsidize hiring can apply to a firms employment level, to…?
Any new employees hired after a certain date (even if they just replace workers who have left)
Or only to new hires that serve to increase the firms level of employment
Subsidies can be either g…… Or s……..
General or selective
A general subsidy isn’t conditional on the characteristics of the people hired
Selective or targeted plan makes the subsidy conditional on hiring people from certain target groups (such as the disadvantaged)
