Question 1

In the short run, the demand for labour for a competitive firm is:

Accepted Answer

The answer of In the short run, the demand for...

Question 2

• Outline step by step the derivation of the short run labour demand curve. Do not confuse this wit the model for long run labour demand involving isoquants and the isocost curves. You do not have t give a graph. The first step is a description of the behavioural assumption. Restrict your analysis to a intuitive but methodical discussion. Include in your analysis an explanation of why it is called the derived demand for labour.
• Explain the different implications for labour demand between the case in which the output marke is monopolized and the case in which it is perfectly competitive.
• Hicks' laws refer to the factors which affect the elasticity of labour demand. Explain the role of each of the following variables, and provide an explanation:
a) the availability of substitute inputs
b) the elasticity of demand for output
c) the ratio of labour cost to total cost.

Accepted Answer

The answer of • Outline step by step the derivation...

Question 3

The primary reason why workers in the fast-food industry are paid less is that:

Accepted Answer

The demand for fast-food products is quite elastic, meaning that consumers are sensitive to price changes. As a result, the demand for labor is also wage elastic, leading to lower wages for workers in the industry.

Question 4

Which of following is correct regarding the impact of globalization on the Canadian market?

Accepted Answer

If Canadian labour and foreign labour are complements, cheaper foreign labour can lead to increased production and scale effects, potentially increasing the demand for both Canadian and foreign labour.

Question 5

Which of the following statements regarding a firm's production function is true?

Accepted Answer

The marginal product of labour curve intersects the average product of labour curve at its highest point, which is where the average product is maximized.

Question 6

The figures below give the production schedule and the product demand schedule for a firm, which has to decide how many workers to hire. $\begin{array}{c}
\begin{array}{lll}
\
\text {Workers}\
\text {hired}\
0\
1\
2\
3\
4\
5\
6
\end{array}
\begin{array}{lll}
\text {Total}\
\text {Physical}\
\text {Product}\
0\
10\
18\
25\
30\
34\
37
\end{array}
\begin{array}{lll}
\text {Price of}\
\text {output}\
\$10\
\$10\
\$10\
\$10\
\$10\
\$10\
\$10\
\end{array}
\end{array}$
-If the wage = $40 for the time period in question, then the number of workers hired is:

Accepted Answer

The answer of The figures below give the production schedule...

Question 7

Regarding an increase in wage, which of the following is INCORRECT?

Accepted Answer

Explanation: An increase in wages typically increases a firm's total costs, not reduces them. Higher wages mean the firm spends more on labor, which increases the cost of production. This statement is incorrect because it suggests that total costs will be reduced with a wage increase, which is not true.

Question 8

The figures below give the production schedule and the product demand schedule for a firm, which has to decide how many workers to hire. $\begin{array}{c}
\begin{array}{lll}
\
\text {Workers}\
\text {hired}\
0\
1\
2\
3\
4\
5\
6
\end{array}
\begin{array}{lll}
\text {Total}\
\text {Physical}\
\text {Product}\
0\
10\
18\
25\
30\
34\
37
\end{array}
\begin{array}{lll}
\text {Price of}\
\text {output}\
\$10\
\$10\
\$10\
\$10\
\$10\
\$10\
\$10\
\end{array}
\end{array}$
-Which of the following is correct regarding the elasticity of labour demand?

Accepted Answer

If the supply of substitute inputs is inelastic, it is harder to replace labor with other inputs, making the demand for labor more inelastic.

Question 9

Consider a firm that seeks to minimize the cost of producing a given level of output. Which of the following statements is true?

Accepted Answer

In equilibrium, a firm that seeks to minimize the cost of producing a given level of output will adjust its input mix so that the ratio of input prices (wage rate to the price of capital) equals the marginal rate of technical substitution (MRTS), which is the rate at which labor can be substituted for capital while keeping output constant. This condition ensures that the firm is producing at the lowest possible cost for a given level of output.

Question 10

It is not necessarily the case that Canadian workers are doomed to hold "bad" jobs as all of the "good" jobs are outsourced to countries with cheap labour. Which of the following related statements is false?

Accepted Answer

Canadian employers do not always have an incentive to seek out the lowest-cost labour for outsourcing, as factors such as quality, productivity, and the nature of the work can influence decisions.

Question 11

The empirical evidence that exists concerning the magnitude of the wage elasticity of labour demand indicates that it tends to be:

Accepted Answer

The empirical evidence generally shows that the wage elasticity of labour demand is negative and inelastic. This means that as wages increase, the demand for labor decreases, but the percentage decrease in labor demand is less than the percentage increase in wages.

Quiz 5: Demand for Labour in Competitive Labour Markets