8. Labor demand will tend to be relatively wage elastic if- a) there are no good
ID: 1115060 • Letter: 8
Question
8. Labor demand will tend to be relatively wage elastic if- a) there are no good substitute inputs available and the wage bill is a large proportion olf b) there are good substitute inputs available and the wage bill is a large proportion of c) there are no good substitute inputs available and the production process is highly d) there are good substitute inputs available and the wage bill is a small proportion of e) there are no good substitute inputs available and the production process is highly total production costs. total production costs. mechanical. total production costs. 9, Since 1980, workers in the United States... a) have worked less hours on average than the French b) have substantially increased their average annual working hours. c) have worked considerably more hours than the Germans. d) have strengthened their collective bargaining as labor unions have gained e) none of the above 10. Suppose that a paper mill in a small rural town is the only employer in the area. This is an example of labor market. a) bilateral monopoly b) monopoly c) oligopsony d) compensating wage differentials. e) monopsony 11. Suppose that cooks that work the late-night hours at a restaurant get paid slightly more than cooks who work during the day shift. This is an example of.. a) an oligopsony. b) a bilateral monopoly. c) compensating wage differentials. e) economic rents. 12. Monopsonistic or oligopsonistic employers will tend to. a) hire fewer workers than firms that compete in labor markets and pay the workers less than their MRPL. b) hire more workers than firms that compete in labor markets and pay the workers less than their MRP c) hire fewer workers than firms that compete in labor markets and pay the workers d) hire more workers than firms that compete in labor markets and pay the workers e) hire the same number of workers as firms that compete in labor markets and pay the more than their MRP more than their MRPL workers less than their MRPExplanation / Answer
8. Labor demand is wage elastic means that the labor demand is highly sensitive to wages. The firms would demand lower labor if wages are high and high demand if wages are low. This is only possible when the dependency of the firm on labor is less and can be flexible. If the process is mechanical, the labor demand would be constant irrespective of wages because the dependency on labor is less. Further, if the wage bills are small proportions of production costs, the firm would not care about the wages while demanding labor. So (b) is the correct option.
9. (d) is the correct option
10. When there is only one employer in the area, then it is a case of Monopsony.
11. Cooks during day time and during night time are being paid differently. This is a case of Compensating Wage Differentials.
12. By definition, monopsonistic or oligopsonistic employers tend to hire fewer workers than firms that compete in the labor market because they have control over the labor market. They also pay the workers less than their Marginal Revenue Product (MRP). So (a) is the right option.
13-15. There seems some missing information on these questions.
16. MFC refers to Marginal Factor Cost of labor which is the amount the firm has to pay to hire an additional worker. (c) is the right option
17. MRP refers to Marginal Revenue Product of labor. (b) is the option
18. For a perfectly competitive firm, (a) is TRUE. The highest value of ouput per worker is when Marginal Revenue Product equals Marginal Factor Cost. This happens at point B. At point C, the MRP is greatly less than the MFC meaning the cost of hiring the last worker is higher then revenue from that last worker. The production process has diminishing returns to labor inputs throughout.
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