Unit 5 (Micro) Flashcards
(26 cards)
If the extra unit that is produced by hiring one more unit of labor adds more to ____ than to ____ the firm will increase its profit by increasing the use of labor
Total revenue; total cost
If the market wage for bricklayers rises from $80 to $1000 the ____ bricklayers will ____
Quantity demanded; fall
An increase in the demand for labor may come about because of
An increase in the price of good labor produces
A increase in productivity of labor will do what to demand
Increase demand. Workers more productive, so employers want more
The labor demand curve in a perfectly competitive factor market is the horizontal sum of all firms’
Value of marginal product curves
Although horses were once a very important factor of production, the development of automobiles and other machinery reduced the demand for their use. This is an example of
Technological progress shifting the demand for horses to the left
Factor demand is said to be derived demand because it
Depends on the product demand
The largest component of the factor distribution of income in the US is
Compensation of employees
If the quanittiy of labor is increased and everything is held constant.. the marginal product of labor will…..
fall
When each factor is paid a payment equal to the value of marginal product of the last unit of that factor employed in the factor market as a whole, this is referred to as
The compensating differential model
What are the four factors of production
- Land
- Labor
- Capital
- Entrepeneurship/human creativity
What are the four factor payments
- Rent
- Wages
- Interest
- Profit
Why is the demand for labor downward sloping
As wage decreases, employers will hire more workers
Why is supply of labor upward sloping
The higher the wage, the more ppl willing to work the job
What shifts the demand for labor
- Human capital
- Better tech
- # resources
What shifts the supply for labor
Baby boom, etc increasing number of ppl
There are 4 workers. their VMPLs are all different and they work in a perfectly competitive labor market. What would their wages look like
Each worker would get paid the same worker. Each worker WOULD NOT be paid his or her VMPL
An important assumption that underlies the marginal productivity theory of income distribution is that
Factor markets are perfectly competitive
The marginal productivity theory of income distribution is that
Each factor is paid the value of the output generated by the last unit employed in that factor market as a whole
According to the _______, workers may earn a wage rate higher than the value of its marginal product to provide an incentive to perform efficently
Efficency-wage model
If the quantity of labor is increased, holding everything else constant, the marginal product of labor will _____
fall
The compensating differential model is when
Each factor is paid a payment equal to the value of marginal product of the last unit of that factor employed in the factor market as a whole
According to the ____ in a perfectly competitive economy each factor of production is paid its equilibrium value of the marginal product
Marginal productivity theory of income distribution
An increase in the market demand for electricians might occur if
The market price of electrical repair and installation services increases
