ECON 200 Chapter Notes - Chapter 16: Marginal Revenue Productivity Theory Of Wages, Marginal Product, Demand Curve

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2 Mar 2015

School

University of Maryland

Department

Economics

Course

ECON 200

Professor

Cindy Clements

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Document Summary

The factors of production: land, labor, and capital. Factors of production- the ingredients that go into making a good or service. Capital- manufactured goods that are used to produce new goods. Derived demand- the demand for factors of production. Marginal product- the increase in output that is generated by an additional unit of input. Slope of the total production curve, when output is plotted against the quantity of the input that is used. A profit-seeking firm will choose the combination of inputs that maximizes profit, based on the local price of each factor of production. Demand for labor (demand for labor > mpl and product price) Each worker hired adds something to total production (that worker"s marginal product) Marginal product diminishes with each added worker. Value of the marginal product (marginal revenue product)- the marginal product generated by an additional unit of input times the price of the output.

Related Questions

If labor productivity increases,

Question 8 options:

the demand for labor increases.

labor costs rise by equal increments.

jobs will relocate.

some workers will be laid off.

In labor markets, the substitution effect occurs when

Question 10 options:

a change in the price of a substitute input reduces the cost of capital.

a change in the price of a substitute input causes the demand for labor to change in the same direction.

a substitute good also functions as a compliment.

the cost of production falls enough that the firm will produce a larger amount of output.

The demand for labor is

Question 6 options:

	derived from the satisfaction that hiring the inputs provides the owner or manager of the firm more money.
	totally unrelated to the demand curve for the final product.
	derived from the demand for the final product being produced.
	derived from a utility-maximizing process similar to that used to derive the demand curve for goods and services.

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1. The slope of the total product curve measures

a. the marginal rate of technical substitution.

b. marginal product.

c. average product.

d. the maximum average product.

e. minimum product.

2. The Law of Diminishing Returns to a variable input (such as labor) assumes that

a. there is at least one fixed input.

b. all inputs are changed by the same percentage.

c. the firm is operating in the short run.

d. all inputs are held constant.

e. a and c.

3. An isoquant curve identifies

a. the maximum output possible, given a fixed budget.

b. the different combinations of goods the can be produced, given fixed amounts of inputs.

c. the different combinations of inputs that can be used to produce a fixed rate of output.

d. none of the above.

4. The ratio of total productivity to the total quantity of a variable input being used in production is

a. equal to marginal physical productivity of the input.

b. constant as employment levels of the input vary.

c. equal to average physical productivity of the input.

d. equal to the marginal rate of technical substitution.

1. In a market economy, the high salaries of some star baseball players such as Adrian Gonzalez, are determined by

		Team owners, based on the total number of star athletes they plan to hire.
	B	advertising companies, based on what they are willing to pay to advertise their products at baseball games.
	C	the interaction of the demand for star athletes and the supply of star athletes.
	D	consumers, based on their willingness to watch baseball games.

2. Demand in factor markets differs from demand in product markets in that

	A	the demand for a factor of production is difficult to determine.
B		the demand for a factor of production is influenced by workers' productivity and by the producers' expected sales revenues, not by tastes and preferences of consumers.
C		demand for a factor of production is based on the tastes and preferences of firms.
D		demand for a factor of production is based on the tastes and preferences of resource owners.

3. The demand for labor is described as a derived demand because

A		it is derived by workers seeking to earn income to fund the consumption of goods and services.
B		it is derived by producers seeking to make profits by starting new businesses.
C		it is derived from the demand for products that use labor in the production process.
D		it is derived from government institutions that rely on labor markets for the purpose of raising tax revenue.

4. Which of the following is not an example of a derived demand?

A		Several of the animated films released between 1999 and 2001 failed to earn a profit, which caused some companies to stop making these films, thereby decreasing the demand for animators.
B		Seth Bullock, a personal injury attorney, complains that he is earning far less now than a few years ago largely because personal injury cases have been undercut by state laws limiting class-action suits and payouts on damages.
C		Millicent Manning, the owner of a furniture store, is concerned that her sales have fallen for the past six months. She attributes this to the downturn in the real estate market.
D		As advancements in medical technology increase the safety and success of laser eye surgery, the demand for opticians has decreased.

5. Marginal revenue product for a perfectly competitive seller is equal to

A		the output price multiplied by the total product of labor.
B		the output price multiplied by the number of workers hired.
C		the change in total revenue that results from hiring another worker.
D		the marginal cost of production.

6. What is the difference between labor's marginal product and marginal revenue product?

A		The marginal product of labor is the increase in output as a result of hiring an additional worker while the marginal revenue product of labor is the increase in profit as a result of hiring an additional worker.
B		The marginal revenue product of labor is the dollar value of hiring an additional worker while the marginal product of labor is the increase in the firm's physical output as a result of hiring an additional worker.
C		The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue.
D		Labor's marginal product is a measure of labor's productivity while labor's marginal revenue product is a measure of labor's ability to sell the firm's products.

7. What is the difference between a firm's marginal revenue and its marginal revenue product?

A		Marginal revenue is the change in sales revenue from selling one more unit of output while marginal revenue product is the profit earned from hiring one more worker.
B		Marginal revenue is the change in sales revenue from selling one more unit of output while marginal revenue product is the change in total revenue from hiring one more worker.
C		Marginal revenue is the increase in revenue when a firm raises its output price while marginal revenue product is the increase in the marginal product when a firm hires an additional worker.
D		There is no difference between the two terms.

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ECON 200 Chapter Notes - Chapter 16: Marginal Revenue Productivity Theory Of Wages, Marginal Product, Demand Curve

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