11.1 Labor Demand

A firm's demand for labor curve is also called its: marginal revenue product of labor curve. marginal factor cost of labor curve. marginal benefit of labor curve. marginal valuation curve.

Firms use information on labor's marginal revenue product to determine: How much to produce at each output price. How many workers to hire at each wage rate. How much labor services to supply at each wage rate. How much marginal product to produce at each wage rate.

Let MP = marginal product, P = output price, and W = wage, then the equation that represents the condition where a competitive firm would hire another worker is: P × MP < W. P × MP > W. P × MP = W. P × W > MP.

The firm's gain in profit from hiring another worker is: The extra output of the extra worker. The difference between marginal revenue product and the wage of the worker. The reduction in costs from hiring another worker. The marginal revenue product of the extra worker.

The demand for labor is described as a derived demand because: It is derived from government institutions which rely on labor markets for the purpose of raising tax revenue. It is derived by producers seeking to make profits by starting new businesses. It is derived by workers seeking to earn income to fund the consumption of goods and services. It is derived from the demand for products that use labor in the production process.

What is the difference between labor's marginal product and marginal revenue product? The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue. Labor's marginal product is a measure of labor's productivity while labor's marginal revenue product is a measure of labor's ability to sell the firm's products. The marginal revenue product of labor is the dollar value of hiring an additional worker while the marginal product of labor is the increase in the firm's physical output as a result of hiring an additional worker. The marginal product of labor is the increase in output as a result of hiring an additional worker while the marginal revenue product of labor is the increase in profit as a result of hiring an additional worker.

The demand for labor depends primarily on the additional output produced as a result of hiring an additional worker and: The payment made to the worker for producing the additional output. The elasticity of demand for the output produced by the worker. The additional revenue received from selling the output produced as a result of hiring an additional worker. The number of workers willing to produce the additional output.

If a worker can produce 20 units of output which can be sold for $4 per unit, what is the maximum wage that firm should pay to hire this worker?

A reason why a perfectly competitive firm's demand for labor curve slopes downward is that: In the short run, as more labor is hired, labor's marginal product falls because of the law of diminishing returns. Each additional unit of labor hired is less efficient than previously hired units. The extra cost of hiring additional units of labor increases as a firm hires more units of labor. The firm's demand curve for the product that uses labor is downward sloping.

Marginal revenue product for a perfectly competitive seller is equal to: The marginal cost of production. The output price multiplied by the number workers hired. The output price multiplied by the total product of labor. The change in total revenue that results from hiring another worker.