A Profit-Maximizing Firm Should Hire Workers Up to the Point
A profit-maximizing firm should hire workers up to the point where labor's marginal revenue product equals the wage rate.
What are the five most important variables that cause the market demand curve for labor to shift?
A firm's labor demand curve is also its marginal revenue product curve.For both the perfectly competitive firm and the output price maker,the labor demand curve slopes downwards.However,there is a difference in the reasons why the labor demand curve slopes downwards.What is this difference?
Refer to Table 17-3.Oil Can Harry's,a new automobile service shop,is ready to start hiring.The table above shows the relationship between the number of mechanics the firm hires and the quantity of oil changes it produces. a.Suppose the price of an oil change is $20.Complete the table by filling in the values for marginal product and marginal revenue product. b.Oil Can Harry's is an input price-taker.Suppose the wage paid to mechanics is $80 per day.What is the profit-maximizing number of mechanics? c.Suppose the wage rate rises to $100 per day. (i)What happens to the firm's demand curve for mechanics? (ii)What happens to the profit-maximizing quantity of mechanics? d.Suppose the wage rate is $60 per day and the price of haircuts is now $15. (i)What happens to the firm's demand curve for mechanics? (ii)What happens to the profit-maximizing quantity of mechanics?