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Economics Questions/Answers chp 7 for MyEconLab (Complete) Queensland University of Technology

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James Moore
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The Demand for Labour
Q. The demand for labour is called a derived demand, because the
A. demand for labour is dependent upon the demand for the good that the labour produces.
Q. What is the difference between the marginal product of labour and the marginal revenue product
of labour?
A. The marginal revenue product of labour is equal to the marginal product of labour multiplied by the
product price.
(The marginal product of labour is equal to the additional output a firm produces as a result of hiring
one more worker. The marginal revenue product of labour is equal to the additional revenue for a firm
as a result of hiring one more worker.)
Q. Why is the demand curve for labour downward sloping?
The demand curve is downward sloping
A. due to the law of diminishing returns.
(The demand curve for labour equals the marginal revenue product of labour. The marginal product of
labour is decreasing due to the law of diminishing returns, where the marginal product of labour
declines as the firm hires more workers.)
Q. What are the five most important variables that cause the market demand curve for labour to shift?
The demand curve for labour shifts with changes in
A. human capital, technology, the price of the product, the quantity of other inputs and the number of
firms in the market.
Q. Fran owns an apple orchard. She employs 70 apple pickers and pays them $22 per hour to pick
apples, which she sells for $5.50 per box. If Fran is maximising profits, what is the marginal revenue
product of labour of the last worker she hired? What is that worker’s marginal product of labour?
Qa. Marginal revenue product of labour of the last worker
Aa. $22 (Price per hour)
(To determine the marginal revenue product of labour (MRPL) of the last worker, remember that when
MRPL equals= W, the firm is hiring the optimal number of workers and is maximising profits.)
Qb. Marginal product of labour of the last worker
Ab. 4 (where MRP
L
equals = P x MP, ($22 = 5.50 x MP) = (MP = 22/5.50) = 4)
(To determine the marginal product of labour (MP) of the last worker, remember that MRPL equals= P
x MP)
Q. Look at this question again Fill in the blanks in the following table forTommy’s Televisions, where
L is the number of workers, Q is the output of televisions per week, MP is the marginal product of
labour (television sets perweek), P is the product price (dollars), MRPL is the marginal revenue
product of labour (dollars per week), W is the wage rate (dollars per week) and PROFIT is the
additional profit from hiring one more worker (dollars per week).
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Economics Questions/Answers chp 7 for MyEconLab (Complete) Queensland University of Technology

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