Why is the demand curve for labor downward-sloping? What causes the labor demand curve for a firm to shift?
What will be an ideal response?
The marginal revenue product curve is the labor demand curve. The marginal revenue product is derived from the MPP and the price of the goods and services being produced. The curve is downward-sloping because of the law of diminishing returns, which causes the MPP to decline as more labor is hired. The demand curve will shift when either worker productivity changes or the prices of the goods and services being produced change.
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A person quits her job in order to spend time looking for a better-paying job. This type of unemployment is an example of
A) frictional unemployment. B) cyclical unemployment. C) seasonal unemployment. D) structural unemployment.
Social Security payments are indexed for inflation using the CPI. A recent newspaper editorial claimed that Social Security recipients are harmed by years of low inflation because they do not receive as large an increase in their payments as they do in years of high inflation. Which of the following statements is correct?
a. The newspaper editorial is correct under all circumstances. b. The newspaper editorial is correct if the market basket consumed by Social Security recipients is the same as the market basket used to compute the CPI. c. The newspaper editorial could be correct if the prices of the goods consumed by Social Security recipients change at a different rate than the prices of the goods in the market basket used to compute the CPI d. The newspaper editorial is incorrect under all circumstances.