What determines the demand for labor, the supply of labor, and labor market equilibrium?
What will be an ideal response?
The demand for labor is the relationship between the quantity of labor demanded and the real wage rate. A fall in the real wage rate increases the quantity of labor demanded because of diminishing returns. The demand for labor also depends on productivity. If productivity increases, the demand for labor increases.
The supply of labor is the relationship between the quantity of labor supplied and the real wage rate. An increase in the real wage rate increases the quantity of labor supplied because more people enter the labor force and the hours supplied per person increases.
The real wage adjusts so that the labor market is in equilibrium. If the real wage rate is above (below) its equilibrium, there is a surplus (shortage) of labor that then causes the real wage rate to fall (rise). For example, if the real wage rate is above the equilibrium level, there is a surplus of labor so the real wage rate falls until it reaches its equilibrium. The equilibrium quantity of employment is the full employment quantity of labor.
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All of the following costs will vary depending on the geographic location of a firm's plant except which one?
A) U.S. corporate taxes B) traffic regulations involving large trucks C) wages D) land prices
The features of the M-Form of firm organization are
a. divisions have difficulty responding to market changes b. it is difficult to maintain customer relationships c. there is less coordination across the firm's divisions d. evaluating employees is easier because managers typically are similarly trained
The essence of the trade-off between equality and efficiency is that
A. taxes and transfers reduce incentives to earn income, thus reducing GNP. B. people are ideologically opposed to socialistic income redistribution. C. redistribution violates the “work ethic.” D. people are prejudiced against blacks and women.
If the substitution effect of a wage change outweighs the income effect of a wage change, the labor-supply curve is
A. horizontal. B. upward sloping. C. backward bending. D. vertical.