ECON 103 Lecture Notes - Marginal Product, Demand Curve, Perfect Competition

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azurelizard859

13 Jan 2022

School

Simon Fraser University

Department

Economics

Course

ECON 103

Professor

Douglas Allen

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Document Summary

The demand for labor tells us how much a firm is willing to pay for a given amount. A firm"s decision"s on wage depends on 2 thigns: the marginal product & price of output. Given that the firm pay each worker a fixed wage rate, the maximizes its consumer surplus . Therefore, a profit maximizing firm hire worker until the wage rate equal the value of marginal product. Changes in wage rates lead to changes in the quantity of labor any firm demands. When wages are high, firms hire fewer workers, because large number of workers would lead to low marginal products and losses for the firm. The demand for labor is downward sloping and lower wages leads to more worker hired. The market demand for labor is made under our normal set of assumptions for a competitive market. A perfectly competitive input market is characterized by the firms that are price take.

Related Questions

Explain why, in a perfectly competitive environment, a profit-maximizing firm will increase its labor force up to the number of workers that equates the prevailing wage rate to the value of the marginal product of labor (the marginal revenue product of labor).

carminemacaw684

Refer to the table below and answer questions A through D.

Labour Output per hour

0 0

1 6

2 11

3 15

4 18

5 19

A. What is the marginal product of labor as the firm moves from using two workers to using three workers?

B. What is the marginal product of labor as the firm moves from using four workers to using five workers?

C. Suppose the price of output is $4 per unit. What is the value of the marginal product of labor as the firm moves from using three workers to using four workers?

D. If this profit-maximizing firm sells its output in a competitive market for $4 per unit and hires labor in a competitive market for $7/hour, then how many workers should this firm hire?

rosewildebeest590

Question 1

A firm should hire workers up to the point where

Question 1 options:

	MP = P.
	MFC = P.
	MFC = MRP.
	MP = MRP.

Question 2

If the additional revenue from hiring an additional worker equals the additional costs from hiring the extra worker, then we know that

Question 2 options:

	MFC/MPP_L = wage.
	MFC/MRP_L = 1.
	MFC = MPP_L.
	MRP_L/P = MFC.

Question 3

A firm that maximizes profits also

Question 3 options:

	pays input prices lower than other firms do.
	cuts corners in production processes so that its products are made too cheaply.
	is inefficient.
	uses the least-cost combination of resources.

Question 4

The demand curve for labor slopes down because

Question 4 options:

	firms value less efficient workers less than they value more efficient workers.
	firms must lower prices to sell the additional units of its product that the extra workers produce.
	of profit maximizing behavior.
	of the law of diminishing marginal product.

Question 5

If MFC > MRP_L, the firm should

Question 5 options:

	get rid of some capital.
	reduce the number of workers.
	lower wages.
	hire more workers.

Question 6

Which of the following will not lead to an increase in the demand for labor for a firm producing automobiles?

Question 6 options:

	A decrease in labor productivity.
	A decrease in the price of automobiles.
	A decrease in the price of robots that are used to solder parts of the car together.
	An increase in the demand for automobiles.

Question 7

The marginal revenue product gives

Question 7 options:

	the additions to total cost when an additional unit of a variable input is hired.
	the additional revenue obtained when an additional unit of a variable input is hired.
	the change in total product for an additional unit of a variable input.
	the amount that other inputs must increase by when labor increase by one unit.

Question 8

The monopolist's input demand curve is the

Question 8 options:

	marginal physical product curve.
	marginal revenue product curve.
	marginal revenue curve.
	marginal factor cost.

Question 9

An increase in product price implies that

Question 9 options:

	the firm's demand for labor increases.
	the firm's demand for labor decreases.
	the wage rate the firm pays will increase.
	the firm's marginal factor cost will increase.