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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

The current market wage rate is \(10, the rental rate of land is \)1,000per unit, and the rental rate of capital is $500. Production managers at a firm find that under their current allocation of factors of production, the marginal product of labor is 100, the marginal product of land is 10,000, and the marginal product of capital is 4,000. Is the firm minimizing costs? Why or why not?

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

Labor Input

(workers per week)


 Total Output
( printers per week)
10 200
11 218
12 234
13 248
14 260
15 270
16 278

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

Recently, there has been an increase in the market demand for products of firms in manufacturing industries. The production of many of these products requires the skills of welders. Because welding is a dirty and dangerous job compared with other occupations, in recent years fewer people have sought employment as welders. Draw a diagram of the market for the labor of welders. Use this diagram to explain the likely implications of these recent trends for the market clearing wage earned by welders and the equilibrium quantity of welding services hired.

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.

Consider Figure 28-1, and suppose that the firm is contemplating 14 units of labor, and it knows that doing so would cause its total production to increase to 4,075 units. What would be the resulting marginal product of the 14th unit of labor employed?
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