Exam 14: Markets for Factor Inputs

Suppose the downward sloping labor demand curve shifts rightward in a labor market with a single employer (monopsony).What happens to the equilibrium wage and level of employment in the market?

When compared to the demand curve for only one variable input,the demand curve for a factor input when several inputs are variable is

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:

Figure 14.4 -Suppose a labor market has perfectly inelastic supply that is composed of union and non-union workers,and 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?

Umberto has a monopoly in providing taxicab services in the local market.The relevant marginal revenue of taxicab sales as a function of labor employment is: . The marginal product of labor in providing taxicab services is 50.Umberto is a price taker in the labor employment market and the market price of labor is $15.Determine Umberto's optimal employment of labor.

An example of monopoly power in input markets is

Currently,Trisha's Fashion Boutique uses 2 sewing machines in the production of dresses (K represents the number of sewing machines).Trisha's marginal product of labor function is Trisha can sell all the dresses she produces for $150 per unit and hire all the labor units she desires at $25 per unit.What happens to Trisha's optimal labor employment if she increases the number of sewing machines to 4?

The table below shows a firm's output per day for zero through six workers. Q L 0 0 46 1 84 2 114 3 136 4 150 5 156 6 The firm's demand and marginal revenue curves are: P = 50 - 0.125Q MR = 50 - 0.25Q, where Q = daily sales,and P = output price. a.Determine the marginal product of labor for one through six workers. b.Determine the firm's marginal revenue product. c.How many workers should the firm hire if total wage costs including fringe benefits are $30 per hour? (Each worker is employed for eight hours per day.)

The industry demand curve for labor is the

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

The market for production workers in a Midwestern metropolitan area is highly competitive.The market supply and demand curves for production workers are given as: L_S = -2500 + 1000W L_D = 10500 - 625W, where L_D = labor demand is full time workers per hour, L_S = labor supply is full time workers per hour, and W = hourly wage.White Manufacturing Co.employs production workers in the manufacture of bearings for skate boards.The firm's production function is given by the expression: Q = 88.8L - 0.5L², where Q = output,measured as boxes of bearings per hour,and L = number of workers employed per hour.From this production function,the marginal product and average product of labor are: MP = 88.8 - L AP = 88.8 - 0.5L White currently sells bearings for $10 per box. a.Determine the equilibrium wage and level of employment in the market.Calculate the total rent that is being earned by workers. b.Determine the number of workers that White Manufacturing would employ at the wage determined in part (a).What total output will White produce?

If clerical workers in your state voted to have a union represent them in negotiations with employers,they would have monopoly power in wage determination.Employers would be in no position to exert monopsony power in their employment of clerks in this market due to the large number of employers in the market.Labor supply is given by L_S = 50W - 100 (or,equivalently W = L_S/50 + 2) Labor demand is given by L_D = 700 - 25W (or,equivalently W = -L_D/25 + 28) a.What is the equation for marginal revenue? b.Using the supply and demand equations,compute the wage rate and number of workers that would be hired when there is no union representation. c.Using the supply and demand equations,compute the wage rate and number of workers hired when the union represents workers and acts to maximize aggregate wages to all workers hired. d.Explain the impact of (c)on the competitive market.

The marginal product of labor for Acme,Inc.is 15.The average product of labor is 25,and the price of labor is $10.Assuming that Acme,Inc.is a competitor in its output and input markets,the marginal revenue product of labor:

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?

What can account for the negative slope of the marginal revenue product curve?

A new motor manufacturing technology changes Ronald's Outboard Motor marginal product of labor from If Ronald can sell all the motors he produces for $100 and pays each unit of labor $10,what happens to the level of employment due to this technology change?

Suppose the local market for legal services has an upward sloping supply curve,P_L = 150 + 0.0001Q_L where P_L is the price of legal services and Q_L is the number of hours of legal services.If the equilibrium price of legal services is $250 per hour,what is the aggregate economic rent earned by lawyers in this market?

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

Figure 14.4 -Given the information in Figure 14.4,the monopoly wage rate is:

An increase in technology that enhances labor productivity will likely result in: