Explain why the marginal revenue product of labor curve is the firm's short-run demand curve for labor.
What will be an ideal response?
The marginal revenue product curve for labor shows the extra revenue that is generated by an additional unit of labor. A profit-maximizing firm will follow the marginal principle and hire labor up to the point where the marginal cost of labor is equal to the marginal revenue. For a firm that is perfectly competitive in the labor market, the marginal cost of labor is equal to the wage rate, since the firm can hire all of the labor it wants at the market wage rate. Marginal revenue is given by the marginal revenue product curve. So a firm will hire labor up to the point where the wage is equal to the marginal revenue product of labor. This gives the relationship between the wage and the quantity of workers demanded, which is the demand curve for labor.
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The decision about how much money to hold is an application of the:
A. cost-benefit principle. B. scarcity principle. C. principle of comparative advantage. D. equilibrium principle.
An increase in the labor force participation rate
A) means there are more discouraged workers. B) implies that the unemployment rate must fall. C) implies that the unemployment rate must rise. D) is consistent with either a rise or a fall in the unemployment rate.
Harry's employer offers a "Holiday Account," which means they will take $50 a month out of Harry's paycheck and deposit it into this account throughout the year. In December, they give Harry the money in the account to spend during the holidays. Harry regularly carries about $200 of credit card debt each month. Harry's decision to set aside some of his money in this account is an example of:
A. ignoring the fungibility of money. B. recognizing that money is fungible. C. needing to categorize expenditures to make rational decisions about money. D. being rational.
Figure 34-6
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From Figure 34-6, one can infer that
A. Honduras will be willing to trade bananas for corn at a unit ratio of no less than 2 corn:1 banana. B. Honduras will be willing to trade bananas as long as the unit exchange ratio is greater than 1/2 corn:1 banana. C. Honduras has no potential to gain from trade. D. Honduras will be unwilling to trade at an exchange ratio.