Therefore, in the long run, the quantity of labor hired falls more than in the short run, making long-run demand the more elastic. Yes, long-run demand for labor is more elastic than short-run demand in the case where labor and capital are substitutes-the cycle is different but the result is the same. When the wage rate rises and the amount of labor falls, the marginal revenue product of capital (and thus the demand for capital) will rise. The firm will use more capital, and in the substitute case, this reduces the marginal product of labor. The firm responds by using less labor, and the cycle repeats. Less labor and more capital will be employed in the long-run equilibrium than in the short-run equilibrium.
(i) Consider the situation before the Japanese factory is built. What area represents the rents earned by American laborers? What area represents the rents and profits earned by owners of factories and firms?
(ii) Consider the situation after the Japanese factory is built. What area represents the rents earned by American laborers? What area represents the rents and profits earned by American owners of factories and firms? What area represents the rents and profits earned by the Japanese owners of the new factory?
(iii) Did the new Japanese factory raise or lower the aggregate rents and profits earned by Americans? How did its entry affect the distribution of American income?
(i) Prior to the Japanese entry, American laborers earn area F in rent. The sum of capital rents and firm profits is area A + C.
(ii) The Japanese entry increases labor employment to L' and the wage rate to W'. The rents paid to American laborers rise to area C + D + F. The sum of capital rents and firm profits is area A + B, with area A going to the American owners and area B going to the Japanese owners.
(iii) The total rents and profits earned by Americans rise from area A + C + F to area A + C + D + F. Income is redistributed from American owners of factories and firms (whose rents and profits fall by area C) to American laborers (whose rents rise by area C + D).
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A) upward sloping. B) downward sloping. C) a vertical line. D) a horizontal line.
The monetarist statistical evidence examines the correlations between both ________ and ________ with ________
A) money; aggregate spending; the unemployment rate B) money; autonomous expenditures; the unemployment rate C) money; consumption spending; aggregate spending D) money; autonomous expenditures; aggregate spending
The greater the accuracy of a forecast, the ________ its value as the firm faces a ________ increase in expected profit.
A) smaller; smaller B) smaller; larger C) greater; smaller D) greater; larger
What is the term for when a company keeps its earnings for capital investment, thereby forgoing the paying of shareholders?
a. distributions b. dividend payments c. retained earnings d. salaries e. business expenses