Exam 14: Markets for Factor Inputs

Use the data in the table below to answer the following questions about a firm. Units of Units of Total Marginal Output Input X Input Y Product Product of X Price 0 25 0 $10 1 25 2 10 2 25 7 10 3 25 14 10 4 25 20 10 5 25 23 10 6 25 24 10 a. Complete the table by calculating the marginal product of input X. b. Compute the marginal revenue produce of input X. c. If the price of input X were $30 per unit, how many units should the firm use per unit of time to maximize profit? Explain why profit is maximized.

If an individual's labor supply curve is backward bending, then

The Acme Company is a perfect competitor in its input markets and a monopolist in its output market. Its average product of labor is 30, the marginal product of labor is 20, the price of labor is $20, and the price of the output is $5. For Acme Company, the marginal revenue product of labor

Under an infinitely inelastic supply of land, the economic rents to land ________ if the price of land doubles.

A firm should hire more labor when the marginal revenue product of labor

Figure 14.2 A consumer's original utility maximizing combination of income and leisure is shown in the diagram above as point A. After a wage decrease, the consumer's utility maximizing combination changes to point C. -Refer to Figure 14.2. The substitution effect of the wage decrease on the amount of hours of leisure is:

Currently, Ronald's Outboard Motor Manufacturing uses 100 power drills in the production of motors (K represents the number of power drills). Ronald's marginal product of labor function is MP_L (L, K) = . Ronald can sell all the motors he produces for $100 per unit and hire all the labor units he desire at $10 per unit. What happens to Ronald's optimal labor employment if he decreases the number of power drills to 90?

Suppose a labor market has perfectly inelastic supply that is composed of union and non-union workers, and there is wage discrimination in the union and nonunion sectors. If the union shifts its policy from maximizing total economic rents to maximizing total wages earned by members, what happens to the equilibrium employment level and wage for non-union workers?

In some markets plumbers have a choice of joining unions or working as nonunion plumbers. The total short-run supply of plumbers is perfectly inelastic at 500 workers per day. The demands for nonunionized and unionized plumbers, respectively, are: W_NU = 30 - 0.04L W_U = 30 - 0.10L. The wage rate is W in $/hr. and the number of workers per day is L. a. Determine the total demand for plumbers. b. Calculate the total market wage rate of plumbers assuming that unionized and nonunionized plumbers get the same wage rate. c. If the unionized workers succeeded in getting their wage increased to $20.00 per hour, how many unionized workers would lose their jobs? d. If the unionized workers in (c) who lost their jobs take jobs as non-unionized workers, how much and in what direction would non-unionized wages change?

The marginal revenue product of labor is equal to

Figure 14.1 A consumer's original utility maximizing combination of income and leisure is shown in the diagram above as point A. After a wage increase, the consumer's utility maximizing combination changes to point C. -Refer to Figure 14.1. The substitution effect of the wage increase on the amount of hours of leisure is:

Suppose the upward sloping labor supply curve shifts leftward in a labor market with a single employer (monopsony). What happens to the marginal expenditure curve?

Scenario 14.4: John's firm is a competitor in your product market and a monopsonist in the labor market. The current market price of the product that your firm produces is $2. The total product and marginal product of labor are given as: TP = 100L - 0.125L² MP = 100 - 0.25L where L is the amount of labor employed. The supply curve for labor and the marginal expenditure curve for labor are given as follows: L = P_L -5 ME_L = 2L + 5 -Refer to Scenario 14.4. Suppose that the price of the product rises to $5, the number of workers hired

A bilateral monopoly is characterized by a market with a single buyer and a single seller. Which factor is most likely to determine the market outcome in this situation?

A major computer software company maintains a technical support center in a rural area and is the only employer in this region. Suppose the firm develops a new software system for managing technical support calls, and the marginal product of labor increases. What happens to the equilibrium outcome in this labor market?

A firm purchases a factor of production in a competitive market. At the current purchase rate the MRP of the factor is greater than the marginal expenditure for the factor. Thus, the firm

Suppose the labor market is perfectly competitive, but the output market is not. When the labor market is in equilibrium, the wage rate will:

When contemplating the purchase of a resource, the pure monopsonist should do which of the following to maximize profit?

Suppose the supply of land is infinitely inelastic and the demand for land is downward sloping but inelastic at the current equilibrium. If the supply curve shifts rightward (e.g., previously unusable land is cleared for production), what happens to the aggregate economic rents in this market?

Mr. Barnes has a monopoly in the production of electricity in the local market. The relevant marginal revenue of electricity sales as a function of labor employment is: MR(L) = 100,000 - 28.57 L. The marginal product of labor in electricity production is 0.01. Mr. Barnes is a price taker in the labor employment market, and the market price of labor is $15. Determine Mr. Barnes' optimal employment of labor.