ECON 1116 Chapter Notes - Chapter 18: Monopsony, Opportunity Cost, Marginal Product

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ochredeer739

24 Aug 2016

School

Northeastern University

Department

Economics

Course

ECON 1116

Professor

Niam Nehan

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The firm is perfectly competitive in the market for apples, price taker f. ii. No market power in the market for labor f. ii. 1. Wage rate is provided: everything else stays fixed, graph, marginal productivity of labor (mpl) Increase in amount of output from one additional unit of labor a. i. a. ii. As you increase input (# of workers) output increases. Marginal product of input * market price of output a. ii. The sixth worker increases production from 100 to 120 a. iv. Worker"s marginal productivity of labor is 120-100 = 20 a. v. Individual labor demand curve a. i. equal to value of marginal productivity a. ii. Downward sloping due to the law of diminishing marginal productivity a. iii. Optimal quantity produced where wage rate = demand curve: market labor demand curve b. i. Sum of individual firm"s demand curve: movement along demand curve is caused by a change in price (wage) c. i. Wage decreases firm hires more workers c. ii. Wage increases firm hires less workers: shifts d. i.

Related Questions

A. Based on the model, firms earn revenue when ______________(firms, households) purchase ___________(goods and services, labor and capital) in markets for goods and services.

B. Suppose Kate earns $800 per week working as a doctor for the Medical Clinic. She uses $9 to order a mojito cocktail at Little Havana. Little Havana pays Hubert $300 per week to wait tables. Hubert uses $175 to purchase medical services from the Medical Clinic.

a. Identify whether each of the following events in the scenario occurs in the market for factors of production or the market for goods and services.

Event	The market for Factors of Production	The market for goods and services
Kate spends $9 to order a mojito cocktail.
Hubert spends $175 to purchase medical services for the Medical Clinic.
Hubert earns $300 per week working for Little Havana.

b. Which of the elements of this scenario represent a flow from a firm to a household? This could be a flow of dollars, inputs, or output.

Kate's labor, The Mojito Kate receives, The $175Hubert's spend to purchase Medical services from the Medical Clinic.

c. The actual economy is more complicated than the one illustrated in the previous circular-flow diagram of a simple economy. True/False.

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1. Suppose that a 10% increase in the wage results in a 5% reduction in employment. In this case, labor demand is said to be:

A. elastic

B. inelastic

C. unit elastic

2. Which of the following best explains why elasticity varies along a linear demand curve?

A. As the quantity of labor demanded rises, the percentage change in quantity demanded declines (for a given change in labor use) while the percentage change in wage increases.

B. As the quantity of labor demanded rises, the percentage change in quantity demanded rises (for a given change in labor use) as does the percentage change in the wage.

C. As the quantity of labor demanded rises, the percentage change in quantity demanded declines (for a given change in labor use) as does the percentage change in the wage.

D. As the quantity of labor demanded rises, the percentage change in quantity demanded declines (for a given change in labor use) while the percentage change in wage decreases

3. Labor demand is more elastic when:

A. the substitution effect resulting from a wage change is larger

B. the scale effect resulting from a wage change is larger

C. both are correct

D. none of the above

4. The scale effect associated with a change in the wage is larger when:

A. the demand for the final product is more elastic

B. labor costs are a smaller share of total costs

C. there are many close substitutes for this category of labor

D. economics of scale are present in the production of the good

5. The price elasticity of demand for the final products affects the own-wage elasticity of demand for labor by affecting the magnitude of:

A. the substitution effect that occurs in the labor market

B. the scale effect that occurs in the labor market

C. both substitution and scale effects

D. neither substitution nor scale effects

6. Unions are expected to attempt to:

A. make it more difficult to replace labor with other resources

B. reduce the elasticity of demand for the final product

C. support laws that reduce the elasticity of supply of other resources

D. all of the above.

E. none of the above

7. Unions are likely to be less successful in negotiating higher wages in those labor markets in which:

A. the demand for the final product is more elastic

B. there are few close substitutes for union workers

C. the price elasticity of supply for other factors of production is relatively high

D. labor costs comprise a small share of total costs

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14. The factor market can best be described as, where __________. a. Families buy goods and services. b. Firms buy goods and services. c. Firms buy the services of labor, land and capital. d. The government sells goods and services.

15.Investment in the US is financed through __________. a. Private savings, surpluses in the government budget, and borrowing from the rest of the world. b. Private savings, deficits in the government budget, and borrowing from the rest of the world. c. Private lending, deficits in the government budget, and lending to the rest of the world. d. Private savings and borrowing from the rest of the world.

16. In the Circular Flow Model, goods and services produced by business firms are sold on __________. a.. The goods market b. In the factor market c. In the labor market d. In the financial market

17. If we import more than we export from the rest of the world, we __________. a.. We must borrow an equal amount from the rest of the world. b. We can lend an equal amount to the rest of the world. c. We have a surplus. d. We are helping to finance the investment of the rest of the world.

18. The Circular Flow Model shows that the family sector earns its income __________. a. Selling factors of production. b. Buying factors of production. c. Selling goods and services. d. Selling financial assets

ECON 1116 Chapter Notes - Chapter 18: Monopsony, Opportunity Cost, Marginal Product

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