Explain how the demand for labor is determined.
What will be an ideal response?
The demand for labor is the downward-sloping portion of the MRP curve. Demand depends on both MPP and the marginal revenue from selling the output. Only the downward-sloping portion of MRP is relevant because along the upward-sloping portion the firm gains by hiring additional workers so long as MRP exceeds wage.
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The substitution effect and the output effect
A. always work in the same direction. B. sometimes work in the same direction. C. always work in the opposite direction. D. sometimes work in the opposite direction.
Suppose that the steelworkers' association introduces a new steel worker licensing requirement. What do you expect will happen?
A. More steelworkers will be employed, at a lower wage. B. More steelworkers will be employed, at a higher wage. C. Fewer steelworkers will be employed, at a lower wage. D. Fewer steelworkers will be employed, at a higher wage.
Compared with a perfectly competitive firm facing the same costs, long-run equilibrium for a monopolistically competitive firm will result in
A) a higher price and greater output. B) a lower price and less output. C) a higher price and less output. D) a lower price and greater output.
When external costs are present in a market,
a. less of the good will be produced than the amount consistent with economic efficiency. b. more of the good will be produced than the amount consistent with economic efficiency. c. the amount of the good produced will be equal to the amount consistent with economic efficiency. d. corresponding external benefits are always generated.