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Chapter 28: Q. 28.1. - Learning Objectives (page 624)

Understand why a firm's marginal revenue product curve is its labor demand curve.

Short Answer

Expert verified
  • Because this firm employs the same number of people, the value of the marginal cost curve curve is also the firm's workforce demand curve, with which the marginal value equals the same wage.
  • The pay rate determines the slope of the labor supply curve.

Step by step solution

01

Introduction.

  • A graph that demonstrates the relationship between marginal revenue product and changing input quantity while keeping all other inputs constant.
  • This curve depicts the incremental change in total revenue as a result of variable input adjustments.
02

 labor demand curve.

  • The pay rate determines the slope of the labor demand curve.
  • The horizontal sum of all labor demands made by all enterprises constitutes the labor market demand.
  • The slope of the labor supply curve is determined by the pay rate.
03

The labour quantity demanded validates a firm's actual sales merchandise slope.

  • Because the firm chooses the amount of labor where the modest value of the item equals the rate of pay, the value-of-marginal-product curve represents the firm's labor demand curve.

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Most popular questions from this chapter

Take a look at the two panels of Figure 28-5. Explain why at the points labeled E1, U.S. firms might have an incentive to outsource labor services abroad. In addition, explain why the shifts in the demand curves to the positions denoted D2 occur in each panel.

The following table depicts the output of a firm that manufactures computer printers. The printers sell for $100each.

Calculate the marginal product and marginal revenue product at each input level above 10units.

Refer back to your answers to Problem 28-1 in answering the following questions.

a. What is the maximum wage the firm will be willing to pay if it hires 15 workers?

b. The weekly wage paid by computer printer manufacturers in a perfectly competitive market is $1200. How many workers will the profit-maximizing employer hire?

c. Suppose that there is an increase in the demand for printed digital photos. Explain the likely effects on marginal revenue product, marginal factor cost, and the number of workers hired by the firm?

If more firms were to find ways to induce larger numbers of workers to hold true to labor supply commitments, would the market labor supply curve tend to shift to the left or to the right? Explain your reasoning.

Suppose that until recently, U.S. firms that produce digital apps had been utilizing only the labor of qualified U.S. workers at a wage rate of \(35 per hour. Now, however, these firms have begun engaging in labor outsourcing to Russia, where qualified workers are available at a dollar wage rate of \)15 per hour. Evaluate the effects of this new U.S. app-labor outsourcing initiative on U.S. and Russian employment levels and wages.
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