Why is there a difference in the strength of demand for labor?
What will be an ideal response?
The main explanation is the marginal revenue product of workers. Those workers with a high MRP will be greatly sought by employers and thus there will be a strong demand for the labor services of these workers. As a consequence they will be paid high wages. Those workers with a low MRP will not be often sought by employers, and thus there will be a weak demand for the labor services of these workers. As a consequence, they will not be highly paid.
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Refer to Table 2-2. Assume Billie's Bedroom Shop only produces pillows and blankets. A combination of 27 pillows and 14 blankets would appear
A) along Billie's production possibilities frontier. B) inside Billie's production possibilities frontier. C) outside Billie's production possibilities frontier. D) at the vertical intercept of Billie's production possibilities frontier.
The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. Assuming a fixed cost of entry, the incumbent will deter entry because
A) it is more profitable than accommodating entry. B) it increases consumer surplus. C) the potential entrant winds up with zero profit. D) the incumbent would earn zero profit if it accommodated entry.