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CAS EC 101 Lecture Notes - Lecture 26: Equilibrium Point, Marginal Cost, Marginal Revenue Productivity Theory Of Wages

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Verified Note
coralcaribou304
3 Nov 2018
School
Boston University
Department
Economics
Course
CAS EC 101
Professor
Bruce Watson

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CAS EC 101 Lecture Notes - Lecture 25: Budget Constraint, Indifference Curve, Opportunity Cost

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CAS EC 101 Lecture Notes - Lecture 26: Equilibrium Point, Marginal Cost, Marginal Revenue Productivity Theory Of Wages

30

CAS EC 101 Lecture Notes - Lecture 30: Masala Chai, Demand Curve, Marginal Cost

Document Summary

Ec 101 lecture 26 - shifts in the labor supply curve / labor demand. For example: if there are more immigrants, it means that there are more possible workers. Caused by the change in one of the non-wage determinants of labor supply, shifting the. Powerpoint, slide 4 labor supply curve to the right. Caused by the change in one of the non-wage determinants of labor supply, shifting the labor supply curve to the right. Marginal product of labor (mp l ): the additional output that is produced by putting in one additional hour of labor. Diminishing marginal product of labor: for each increasing hour of additional input goes into producing the output, the additional output produced decreases. Assume that all of the other factors of input is constant. As the number of hours increase, the marginal product of labor decreases.

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Related Questions

The labor supply curve shift following a decrease in the capital stock is a result of _____________.

A. intertemporal substitution of leisure

B. a negative income effect

C. consumption smoothing

D. a positive income effect

When current total factor productivity increases:

A. firms sell capital because the remaining capital is more productive

B. firms hire more workers because the marginal product of labor increases.

C. firms hire fewer workers because the remaining workers are more productive

D. firms increase investment because the marginal product of capital increases

Which of the following correctly explains why the labor demand curve doesn't shift following an increase in government spending?

A. There is no substitution effect.

B. There is no income effect.

C. There is no change in the wage rate

D. There is no change in the marginal product of labor.

b. Thoroughly and completely explain the Law of Supply i. Define supply and state the law of supply. ii. List and explain the determinants of supply and how each can either cause an increase in supply or a decrease in supply. 1. There are 6 determinants of supply listed in the slide set. You should be able to list and explain how each shifts the supply curve to the left or right. iii. Thoroughly and completely explain the differences between a change in supply and a change in quantity supplied. 1. You should be able to explain each of these cases.

c. Thoroughly and completely explain the following graph of market equilibrium. i. Explain what market clearing equilibrium means. 1. Explain what this really means. Please be thorough. ii. Discuss what happens at a price above and below the equilibrium price, and why those things happen!!! 1. What if the price were above the equilibrium price – Explain what happens. 2. What if the price were below the equilibrium price – Explain what happens.

Dr. Joel is a doctor in a large metropolitan city in the United States. He earns $100, 000/yr and plans on working three more years and then retiring. A remote, rural town in the state in which he resides is in desperate need of a doctor and offers Dr. Joel the job. If Dr. Joel moves, he will still only work for three years (thereby not adjusting his retirement plans). He would incur $15,000 in psychic costs if he moves due to the disutility he experiences from moving to such a remote location. Dr. Joel's discount rate is 5%.

 

1. What is the minimum annual salary that the remote town must pay Dr. Joel per year for him to accept its job offer?

2. Assume the labor demand for unskilled workers in a city in Texas is given by Ld = 80 - 2w. The labor supply curve of natives (i.e., non-immigrants) is given by Ls = -20 + 8w, where w is the hourly wage.

(a) Calculate the equilibrium level of employment and wage rate if there are no immigrants.

(b) Suppose the arrival of Mexican immigrants shifts out the labor supply curve to Ls0 = -5+8w. Calculate the new equilibrium level of employment and wage rate.

(c) What has happened to the employment level of natives as a result of the immigrant arrival? What has happened to the unemployment rate of unskilled native workers?