wage determination p1

Question 1

What are the two diagrams needed to show wage determination in a perfectly competitive labor market?

Answer 1

1. Industry labor market diagram
2. Individual firm labor market diagram

Question 2

What is labeled on the y-axis of the labor market diagram?

Answer 2

Wage

Question 3

What is labeled on the x-axis of the labor market diagram?

Answer 3

Quantity of workers

Question 4

How is the supply curve in the labor market diagram represented?

Answer 4

Upward sloping

Question 5

How is the demand curve in the labor market diagram represented?

Answer 5

Downward sloping

Question 6

Where do supply and demand meet in the labor market diagram?

Answer 6

At the equilibrium quantity of workers (QC) and wage (WC)

Question 7

What does the firm in a perfectly competitive labor market become regarding the wage?

Answer 7

Wage taker

Question 8

What does the wage WC represent for the firm?

Answer 8

Average cost of labor and marginal cost of labor

Question 9

What is the firm’s demand curve labeled as?

Answer 9

D = MRP (Marginal Revenue Product)

Question 10

What determines the firm’s employment in the labor market?

Answer 10

Where demand equals supply for the firm

Question 11

What is the firm’s quantity of workers called in the diagram?

Answer 11

q1

Question 12

True or False: In a perfectly competitive labor market, firms can set their own wages.

Answer 12

False

Question 13

Fill in the blank: In the industry labor market, wages are determined where supply and demand meet at _______.

Answer 13

equilibrium

Question 14

What must be done to the axes and curves in both diagrams?

Answer 14

They must be labeled correctly

Question 15

What is the importance of labeling in diagrams?

Answer 15

To avoid confusion and ensure clarity