"The market demand curve for labor is the horizontal summation of the labor demand curves of all firms." Do you agree or disagree? Why?
What will be an ideal response?
Disagree. A reduction in the wage rate causes each firm to move down their demand curves for labor and hire more workers. Industry output increases, which means product price falls. The fall in the product price causes the individual firm's demand curve for labor to shift to the left. The market demand curve for labor reflects not only the shape of the individual demand curves, but also this shift in the MRP curve.
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According to this Application, the Fed injected large amounts of reserves into banks during the 2008 financial crisis. The Fed needs to make sure that, in the long run, banks do not loan out too many of these reserves or the result will be
A) additional unemployment. B) higher inflation. C) higher interest rates. D) a smaller money multiplier.
If immigration is limited, it will move the aggregate supply curve left, due to a decrease in
Which of the following is an argument that the incidence of corporate taxation falls entirely on consumers?
A) Corporations pass their tax burdens on to consumers by charging higher prices equal to the amount of the tax. B) Corporations pass their tax burdens on to consumers because consumers ultimately work for the corporations. C) Corporations always evade taxes so that consumers ultimately bear the tax burdens as taxpayers. D) Most taxes on consumers are collected by corporations through sales taxes.
Braun and Evans found that
A) the measured Solow residual varied sharply over the seasons. B) electricity use by producers rises sharply in economic upturns. C) professional forecasters have rational expectations of inflation. D) shocks to fiscal policy are the main source of business cycle fluctuations.