Question 1

On a graph, draw an indifference curve for a workaholic versus a laid-back person. Comment on their respective marginal rates of substitution between leisure and consumption.

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Question 2

Explain how a union is similar to a cartel.

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Question 3

A pizza shop's marginal product of labor, measured as the number of pizzas delivered per week, is MP_l = 55 - 5L, where L is the number of workers. The current average price of a pizza in this highly competitive market is $10. The shop, a monopsonist, faces labor supply of W = 100 + 40l, where W is the wage per week and L is the number of workers. a. How many workers will the pizza shop hire when the price of a pizza is $10? b. An influx of college students coming back from vacation raises the market price of a pizza to $15. How many workers will the pizza shop hire when the price of a pizza is $15?

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Question 4

Explain how the following would affect the equilibrium wage and quantity of labor in the labor market.
a. a decrease in the price of the output made by labor
b. an increase in legal immigration
c. an increase in the amount of capital used by firms

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Question 5

A firm sells bagels for 50 cents each. With 10 workers the firm produces 100 dozen per hour, and with 12 workers it produces 123 dozen per hour. If the firm has 12 workers at the competitive equilibrium, what is the marginal revenue product of labor and the market wage rate, assuming an average 8-hour shift per worker?

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Question 6

The marginal product of labor curve for Coast to Coast, a standup paddle board outfitter, is MRP_L = 500 -100L, where L is the number of guides hired per week and MRP_L is dollars earned per guide per week. The prevailing market wage is $200 per week. a. Graph both the MRP_L and the prevailing market wage in the grid provided. b. What is the choke wage for Coast to Coast? c. What will be the optimal amount of labor for Coast to Coast to hire?

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The answer of The marginal product of labor curve for...

Question 7

Suppose the demand faced by a labor monopsony is W = 40,000 - 100l, where W is the annual wage and L is the number of workers hired. The labor supply is given by W = 10,000 + 100l.
a. Derive the marginal expenditure equation.
b. Determine the wage the monopsonist would pay and how many workers it would hire.

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Question 8

At many colleges and universities, adjunct (part-time) faculty do not belong to a union. Explain what would happen to faculty wages and employment at a university if the adjunct faculty successfully unionized.

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Question 9

Use an example to explain why labor demand is considered a derived demand.

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Question 10

(Figure: Minimum Wage I) Explain and graphically illustrate how the passage of a minimum wage would affect this market.

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Question 11

(Table: Short-run Production Function I) The table shows the short-run production function for a competitive firm.  
a. Complete the table, assuming the firm sells its output for $20 per unit.
b. How many workers will the firm hire at the market wage of $160 per day?

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Question 12

Monika, a student, can work or enjoy leisure for 16 hours a day. (Assume she sleeps 8 hours a day.) a. On a graph, construct Monika's budget constraint if she earns $10 per hour. Label is BC₁. b. On the same graph, construct Monika's budget constraint if she earns $15 per hour. Label is BC₂. c. On the same graph, construct Monika's budget constraint if she earns $10 per hour but receives the equivalent of $50 per day from her parents. Label is BC₃.

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Question 13

(Table: Marginal Expenditure Curve I) Explain why a monopsony faces a marginal expenditure curve that lies above the supply curve. Each worker is named, for a total of four workers. All dollar values are given as dollars per hour.

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Question 14

(Figure: Budget Constraint for Work or Leisure I)  
a. Graph a budget constraint assuming a person has 24 hours that can be used for work or leisure at a wage rate of $20. Note the optimal consumption-leisure bundle.
b. Graph a budget constraint assuming a person has 24 hours that can be used for work or leisure at a wage rate of $30. Note the optimal consumption-leisure bundle.
c. Determine both the income and substitution effects on the graph.

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Quiz 13: Factor Markets