Exam 10: Input Demand: the Labor and Land Markets

What does it mean for a good to have a demand-determined price?

Affiliated Plastics Corporation sells bubble wrap for shipping in a competitive market. The price of the bubble wrap is $3 each. Hourly output varies with the amount of labor hired as follows: Fill in the columns for marginal product of labor and marginal revenue product.

Use a supply and demand graph to explain why the rent on land is demand determined.

What is the shape of a firm's marginal revenue product curve? Why does it look this way?

What determines how much labor a household will supply?

Why is the demand for an input considered a derived demand?

People often complain bitterly when they learn that CEOs of non-profit companies like the United Way or the Red Cross earn salaries commensurate to what could be earned in by CEOs employed by for-profit companies? Is this complaint valid? Explain.

According to the text, what economic principle justifies the high salaries of some Professional athletes?

How is a competitive firm's demand for labor derived when labor is the firm's only variable factor of production in the short run?

Assume that workers in a purely competitive industry are earning a wage rate of $15 and the price of the product they are producing is also $15 what does this imply about the marginal productivity of these workers?

A firm producing ink pens reports the following production information: The pens sell in a competitive market at a price of $0.50 per box. The firm hires workers in a competitive labor market at a wage of $9 per hour. How many workers should the firm hire? Explain your answer.

Fred's Pizza Palace sells pizzas in a competitive market. The price of the pizzas is $1.25 each. Hourly output varies with the amount of labor hired as follows: Fill in the columns for marginal product of labor and marginal revenue product.

What role do households play in the market for inputs? What role do firms play?

Explain the three fundamental decisions that firms in perfectly competitive markets must make. Explain how these decisions are interrelated.

Many cities in California have severe land-use laws and ordinances, which effectively take off the market large amounts of land for residential or commercial construction. If the demand for housing increases in these cities without any increase in the stock of housing or commercial buildings then what is the likely impact that this will have on home prices and commercial structures? How might this affect where corporations choose to locate factories?

A firm producing hard drives for the Apple IPhone reports the following production information: Does this production function exhibit diminishing returns? Explain. If so, at which worker is this taking place?

In what way does land differ from other inputs such as labor and capital?