MRU18.2: The Marginal Product of Labor
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Questions and Answers

The demand for labor is _______ demand.

a derived

According to the video, the marginal product of labor is:

  • The increase in a firm's output created by hiring an additional laborer.
  • The increase in a firm's revenues created by hiring an additional laborer. (correct)
  • The increase in the firm's workforce created by hiring an additional laborer.
  • The increase in the firm's costs created by hiring an additional laborer.

    • Which of the following is true regarding the marginal product of labor?

  • It declines as more labor is used. (correct)
  • It declines as more capital is used.
  • It rises as the product price falls.
  • It rises as more labor is used.

    • Firms will continue to hire more employees as long as:

    <p>The wage is less than the marginal product of labor.</p> Signup and view all the answers

    If the wage falls, firms will hire _______ workers because _______.

    <p>more; more workers will have a marginal product of labor that exceeds the wage</p> Signup and view all the answers

    The demand curve for labor is derived from:

    <p>The marginal product of labor.</p> Signup and view all the answers

    In the market for a certain type of labor, the wage for that labor is determined by:

    <p>The intersection of labor demand and labor supply.</p> Signup and view all the answers

    How might an individual's supply curve for labor differ from the market supply curve for labor?

    <p>At high wages, an individual's labor supply curve may have a negative slope.</p> Signup and view all the answers

    Why does a market labor supply curve have a positive slope?

    <p>As wages rise, more and more workers will enter the market.</p> Signup and view all the answers

    Which of the following gives a labor demand-related reason that American janitors earn more than janitors in India?

    <p>American office buildings are more productive.</p> Signup and view all the answers

    Study Notes

    Demand for Labor

    • The demand for labor is classified as derived demand, meaning it is based on the demand for the final goods and services produced.
    • A firm's decision to hire additional labor relates directly to the expected increase in revenues from that labor.

    Marginal Product of Labor

    • Marginal product of labor (MPL) measures the increase in output generated by employing one more laborer.
    • It is important to note that the MPL typically declines as more labor is added due to the law of diminishing returns.

    Hiring Decisions

    • Firms will hire more employees if the wage paid is less than the marginal product of labor.
    • A decrease in wage levels leads firms to increase hiring, as more workers are likely to have MPL that exceeds the wage.

    Labor Demand Curve

    • The demand curve for labor is derived from the marginal product of labor, highlighting the relationship between output production and labor employment.
    • The equilibrium wage in the labor market is determined where labor demand meets labor supply.

    Individual vs. Market Supply Curve

    • An individual's supply curve for labor may differ from the market curve; at high wages, it can slope negatively, indicating a potential decrease in hours offered due to increased income effects.
    • Conversely, the market supply curve tends to slope positively, as higher wages generally attract more workers into the labor market.

    Labor Supply Dynamics

    • The positive slope of the market labor supply curve reflects that as wages rise, the incentive for more individuals to supply labor also increases.

    Wage Disparities in Labor Markets

    • Differences in wages, like that between American and Indian janitors, can often be attributed to productivity levels; American office buildings are typically more productive, warranting higher wages for janitor services.

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    Test your knowledge of the marginal product of labor with these flashcards. This quiz covers key concepts such as the demand for labor and the implications of hiring additional workers. Perfect for students studying economics.

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