Explain the relationships between the marginal product of labor and the demand for labor, and the marginal product of capital and the demand for capital
What will be an ideal response?
The marginal product of labor is the extra output a firm receives from adding one more unit of labor, holding all other inputs and efficiency constant. Firms hire workers up to the point where the marginal product of labor equals the real wage, and since the real wage is determined by the demand for labor, the marginal product of labor is the demand for labor. The marginal product of capital is the extra output a firm receives from adding one more unit of capital, holding all other inputs and efficiency constant. Firms purchase capital up to the point where the marginal product of capital equals the real rental price of capital, and since the real rental price of capital is determined by the demand for capital, the marginal product of capital is the demand for capital.
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Pollution is an example of a
A) negative externality B) positive externality. C) private cost. D) public good.
Which of the following best illustrates the fallacy of composition?
a. I hate driving to work when the traffic is so heavy, so I decide to leave 30 minutes earlier than in the past. If everyone were to leave 30 minutes earlier for work, we'd all get to work faster. b. A great many people have been immunized against polio because it can be such a devastating disease. As a result, I probably do not personally need to be immunized against polio. c. Whenever I attend a baseball game at the local stadium, the home team wins. Therefore, if I attend all of the team's local games, they will achieve a perfect winning record at home. d. The parking at Ohio State University is in short supply on the main campus. It would be better for more people to ride the bus to school.
Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is:
A. not an economic problem because it's an hour that Chris has no matter what he does. B. an economic problem because Chris has only one hour, and engaging in one activity means giving up the other. C. not an economic problem because neither activity costs money. D. an economic problem because the tuition Chris pays covers the cost of both the gym and the library.
If demand is elastic and price is lowered, total revenue will
A. rise. B. fall. C. stay the same. D. possibly rise and possibly fall.