What factors shift the demand for labor curve? Briefly describe the effect of each
What will be an ideal response?
Three factors shift the demand for labor curve: the price of the firm's output, the prices of other factors of production, and technology. When the price of the firm's output rises, the firms' demand for labor increases and its demand for labor curve shifts rightward. These changes occur because when the price of output rises, the value of marginal product increases, which means the value to the firm of hiring additional workers rises.
When the prices of other factors of production change, the demand for labor changes. When the price of capital rises, the firm is motivated to use more labor and less capital. The firm's demand for labor increases and the demand for labor curve shifts rightward. When the price of capital falls, more capital is demanded and, unless the fall in the price of capital increases the scale of the firm's operations, less labor is demanded. The demand for labor curve shifts leftward.
Changes in technology affect the demand for labor in a more complex way. Depending on the type of advance in technology, the demand for different types of labor might increase or decrease. If the demand for a type of labor increases, its demand curve shifts rightward; if the demand for another type of labor decreases, its demand curve shifts leftward.
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Diseconomies of scale occur
a. before the optimal scale is reached. b. at the optimal scale of operation. c. after the optimal scale is reached. d. prior to the lowest point of the ATC curve.
During the 100 years before the Revolutionary war, shipping costs were reduced by nearly:
a. 10 percent. b. 25 percent. c. 50 percent. d. 70 percent. e. Shipping costs increased during that period.
The federal funds market is the market where:
a. the federal government raises funds to cover its budget deficit. b. the Federal Reserve System makes loans to commercial banks. c. commercial banks with excess reserves make loans to commercial banks seeking reserves. d. commercial banks make loans to the Federal Reserve.
What was the lowest federal funds rate target the Fed set in response to the financial crisis?
a. 0% b. 1.8% c. 2.0% d. 2.2%