MRP - DEMAND FOR LABOUR

Question 1

LABOUR MKT MINDSET

Answer 1

Firms demand labour

individuals supply labour

Question 2

Demand for labour = supply what do we get

Answer 2

equilibrium wage rate

equilibrium quantity of workers

Question 3

what is demand for labour for an individual firm

Answer 3

• shows us how many workers firms will hire at any given wage rate over given period of time

Question 4

demand for labour is described as a

Answer 4

derived demand

Question 5

demand for labour is a derived demand what does this mena

Answer 5

comes from demand for goods and services

Question 6

when will labour demand be high

Answer 6

only when demand for g/s high q

Question 7

as demand for labour is only high when demand for g/s is high what does htis mean about fimrs hiring indiivudals

Answer 7

only hire workers as theres a need for workers to produce g/s

Question 8

Firms wll base demand decision for labour on

Answer 8

Marginal Revenue Product

Question 9

what is Marginal Revenue Product

Answer 9

extra revenue generated when additional worker is hired

Question 10

MRP formula

Answer 10

Marginal Physical Product * Marginal Revenue

Question 11

Marginal Physica Product means

Answer 11

marginal product

Question 12

data we use when pplotting grpah is for an individul firm in the SR so they are experiencing

Answer 12

LODR

Question 13

As data we use to plot graph comes from an individual firm experiencing LODR what happens to TPP and MPP

Answer 13

increase intially then decreases due to the LODR as theres a constraint on fixed factors of production

Question 14

we also assume fimr is operating in a

Answer 14

perfect compeition market

Question 15

as firm is operating in a perfect competition market they are

Answer 15

price takers

Question 16

price is equal to

Answer 16

AR

and

MR

Question 17

as price is equal to MR how else can we calculate MRP

Answer 17

price * marginal physical product of each individual worker

Question 18

when plotting MRP curve what is on the y axis

Answer 18

wage/output

Question 19

when plotting MRP what is on the x axis

Answer 19

quantity of workers

Question 20

MRP =

Answer 20

demand for labour

Question 21

why does MRP = d

Answer 21

shows at any given wage rate how many workers firms should employ

Question 22

why is teh MRP kinda shaped liek an upside down U

Answer 22

LODR

Question 23

Exaplinn why MRP was increasing as we hired 3 workers

Answer 23

brought more rev than previous workers so MRP was increasing

e.g 3rd worker brought in more rev than 2nd

Because of specialisation gains and excess land and capital being utilised

so more productive than previous works so MRP was increasing

Question 24

After 3rd worker 4,5,6 workers suffer from lower productivity why ?

Answer 24

constraints from FFOP of capital and land become an issue

e.g bump into each otehr as not enough capital

and individual productivity starts to decrease so MRP falls

Question 25

why is wage rate constnatly 60

Answer 25

because we assume firms are operating in perfectly comp labour market therefore wage takers

Question 26

as firms operating in perfectly comp they are wage takers what does this mean

Answer 26

no control over wage paid 2 employers

Question 27

as firms have no contrl over wage paid tehy must take.... so...

Answer 27

Must take wage rate set in industry labour market and give it workers thats why its constant for every worker

Question 28

wage rate =

Answer 28

marginal cost of labour

Question 29

Why is wage rate equal to marginal cost of labour

Answer 29

because its constant

Question 30

explain why age rate = MCL e.g if wage rate is £60

Answer 30

Every time hire worker pay extra £60 which is constant hence marginal cost of labour

Question 31

MRP can also give us comnditions for

Answer 31

firms to maximise revenue brought in from workers

Question 32

in terms of MRP where will firms hire up till

Answer 32

MRP = wage

Question 33

lets say my wage rate is 60 and efficiency of # of workes to hire is 5 why wouldnt it make sens to hire mroe than 5

Answer 33

If hired 6th worker MC higher than MR , worker Costs more to firm than what brings in via MRP So no sense as fmr will lose out on rev So pointless hiring beyond where MRP = W/MCL

Question 34

ets say my wage rate is 60 and efficiency of # of workes to hire is 5 why wouldnt it make sens to hire less than 5 workers

Answer 34

all workers before 5 bring more rev to frmt han cost MR>MC so by hiring another worker can bring more rev thn cost , firm able to maximise its benefit by hiring more workes up till where MRP=MC/ MRP=WAGE Before this makes no sense to stop as rev higher cost so firms can bring in mre rev if higher more workers

Question 35

KEY CONDITION about firm efficient employment decision

Answer 35

to make efficient employment decision should keep hiring workes up till MRP = WAGE i.e MC of labour