Explain why the marginal revenue product of labor curve is the firm's short-run demand curve for labor.
What will be an ideal response?
The marginal revenue product curve for labor shows the extra revenue that is generated by an additional unit of labor. A profit-maximizing firm will follow the marginal principle and hire labor up to the point where the marginal cost of labor is equal to the marginal revenue. For a firm that is perfectly competitive in the labor market, the marginal cost of labor is equal to the wage rate, since the firm can hire all of the labor it wants at the market wage rate. Marginal revenue is given by the marginal revenue product curve. So a firm will hire labor up to the point where the wage is equal to the marginal revenue product of labor. This gives the relationship between the wage and the quantity of workers demanded, which is the demand curve for labor.
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a. A family's purchase of a new home b. A family's purchase of a used car c. A family's payment for a child's hospitalization d. A family's purchase of Microsoft stock e. A family's purchase of a swing set for their home day-care business
Suppose that the total production of an economy consists of 10 oranges and 5 candy bars, each orange sells for $0.20, and each candy bar sells for $1.00. What is the market value of production in this economy?
A. $7.00 B. $1.20 C. $2.00 D. $5.00