Exam 14: Markets for Factor Inputs

Suppose labor and capital are variable inputs.The wage rate is $20 per hour,the marginal product of labor is 30 units,the rental rate of capital is $100 per machine hour,and the marginal product of capital is 150 units.If the wage rate declines to $15 per hour,the firm employs more labor and the marginal product of labor declines to 20 units.Assuming the rental rate of capital remains the same,what happens to the amount of capital used by the firm?

Mr.Barnes' Mine has a monopoly on coal production in the local community.Also,Mr.Barnes' Mine is the sole employer in the local community.The market supply of labor is: L^S(w)= 50w - 250 Or equivalently w = 50 + 0.02L^S Mr.Barnes' wage bill is: WB = 50L + 0.02L² The resulting marginal expenditure of labor function is: ME(L)= 50 + 0.04L The marginal product of coal as a function of labor is: MP_L = 0.01. The marginal revenue of coal sales as a function of labor is: MR(L)= 100,000 - 28.57L Determine Mr.Barnes' marginal revenue of the product of labor.What is Mr.Barnes' optimal employment of labor? What is the wage rate Mr.Barnes pays for a unit of labor?

Under an upward sloping supply curve for land,the economic rents to land __________ as the demand for land shifts rightward.

Clarke Mementos manufactures small figurines that they sell to retailers around the country.Clarke sells the figurines for $5.00 each,a price the firm considers given.Clarke's production function is given by the expression: Q = 60L - 0.5L², where Q = number of figurines per day,and L = number of skilled workers per day.Based on this production function,the average and marginal products of labor are as follows: AP = 60 - 0.5L MP = 60 - L a.Write an expression for the firm's marginal revenue product. b.Clarke currently pays $150 per day (including fringe benefits)for each of its skilled workers.How many workers should the firm employ? c.Clarke's workers are highly skilled artisans with a great deal of job mobility.The firm's managers fear that they must increase the workers' total compensation to $200 per day to remain competitive.What impact would the wage increase have upon the firm's employment?

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

Maureen's Custodial Services has a monopoly in custodial services in the local community.The relevant marginal revenue of custodial services as a function of labor employment is: MR(L)= 70 - 0.029L. The marginal product of labor in providing custodial services is 0.1.Maureen is a price taker in the labor employment market and the market price of labor is $6.Determine Maureen's optimal employment of labor.

When comparing the market price of an input in a market characterized by bilateral monopoly to a perfectly competitive price

Which of the following is NOT true about the supply of labor to the firm in a competitive 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 labor and capital are variable inputs.The wage rate is $20 per hour,the marginal product of labor is 30 units,the rental rate of capital is $100 per machine hour,and the marginal product of capital is 150 units.If the wage rate declines to $15 per hour,the firm employs more labor and the marginal product of labor declines to 20 units.Assuming the rental rate of capital remains the same,what is the marginal product of capital at the new optimal level of input usage?

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 - 28.57L.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.

The marginal revenue product of labor is equal to

The marginal product of labor at Trisha's Fashion Boutique is Trisha can sell all the output she can produce for $100 a unit.If Trisha pays a wage rate of $20 per unit of labor,calculate Trisha's optimal labor employment level.If the wage rate rises to $25 per unit,what happens to Trisha's optimal employment level?

If the factor supply curve facing a monopolist is the market supply curve,and if the market supply curve is an upward sloping straight line,the marginal expenditure curve

The Acme Company is a perfect competitor in its input markets and a monopolist in its output market.The marginal product of labor is 20 and the price of Acme's output is $10.For Acme Company,the marginal revenue product of labor is

The marginal product of labor at Ronald's Outboard Motor Manufacturing plant is Ronald can sell every unit of output he produces for $100.Determine Ronald's marginal revenue of the product of labor.If Ronald can hire all the labor hours he would like at $15,calculate Ronald's optimal employment level.If the wage rate falls to $10,calculate Ronald's new level of employment.

Figure 14.3 A labor union is exercising monopoly power in the labor market. -Refer to Figure 14.3.To maximize economic rent,the labor union will agree to wage rate:

Under what circumstances will the economic rent earned by a factor of production always be zero?

Suppose a competitive industry produces output,Q,using some input,i,where the price of the output is P_Q and the input price is P_i.Efficient use of resources requires that

When the factor market is purely competitive,the firm's average expenditure curve for a factor of production is