Exam 14: Markets for Factor Inputs

In the United States,major league baseball is exempt from antitrust laws.Before 1975,the baseball team owners agreed to hold an annual draft of amateur baseball players.Once the players were drafted and signed by a team,they were effectively tied to that team for life.Before 1975,professional baseball players were paid:

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.

Who does NOT earn economic rent in a competitive factor market?

All of the payment to a factor of production will be economic rent when the factor of production has:

The following expressions describe a perfectly competitive labor market.The labor supply curve is: S_L = AE = $3.00 + $0.000375L. The marginal revenue product of labor curve is: MRP_L = $13.00 - 0.000433L. a.Find the equilibrium wage in this labor market.Also,find the optimal number of labor hours worked per week.Let L represent the number of labor hours worked per week,and let W represent the hourly wage of workers. b.Determine the economic rent earned by labor in this situation.

A new pizza producing technology changes One Guy's marginal product of labor from If One Guy's can sell all the pizza it produces for $12 and pays each unit of labor $8,what happens to the level of employment due to this technology change?

If the firms in an industry could take advantage of a reduced wage,how would one best describe the firms' demand for labor? The MRP_L

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 and the average number of hours that a lawyer works per year is 2,500,what is the average economic rent earned per lawyer in this market?

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 income effect of the wage decrease on the amount of hours of leisure is:

In the United States,major league baseball is exempt from antitrust laws.Before 1975,the baseball team owners agreed to hold an annual draft of amateur baseball players.Once the players were drafted and signed by a team,they were effectively tied to that team for life.This allowed baseball owners to operate like __________ in the market for player services.

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

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:

The marginal product of labor at One Guy's Pizza is One Guy's pays each unit of labor the minimum wage of $6.00.Also,One Guy's can sell all the pizza it produces for $12.What is the optimal level of labor employment for One Guy's pizza? If the minimum wage is raised to $8,what impact will this have on One Guy's optimal labor employment level?

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

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

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

Data in the following table refer to the purchase of a resource by a pure monopsonist.Let the resource be labor time L,measured in hundreds of hours per day. Units of Labor Marginal Average Marginal Revenue Input Expenditure Expenditure Product L ME AE MRP 1 10 10 16 2 12 11 15 3 14 12 14 4 16 13 13 5 18 14 12 6 20 15 11 7 22 16 10 8 24 17 9 a.Determine the profit maximizing purchase rate of labor for the monopsonist. b.If this market were not monopsonistic but competitive,what would be the purchase rate of labor time? c.Determine the equilibrium wage rate in both the monopsonistic and competitive markets?

In a competitive labor market,the supply of labor curve is expressed as: AE = $5 + 0.0025L, where AE represents the average expenditure ($/unit)and L represents units of labor hired per unit of time.The demand for labor is based on the following expression: MP = 5 - 0.001L, where MP represents marginal product of labor.Revenue from the final good is $5 per unit sold in a competitive market. a.Determine the equilibrium wage rate and labor employment rate. b.Compute the economic rent earned by labor.

There is always some economic rent whenever

Which of the following is TRUE concerning equilibrium in a monopsonistic factor market?