Microeconomics · free preview
The Demand for Labor
Firms hire labor because workers produce revenue, hiring stops where the wage equals the marginal revenue product, and diminishing returns make the demand for labor slope down.
1. A derived demand
A derived demand
2. The hiring rule
The hiring rule
3. Shifting labor demand
Shifting labor demand
4. What the rule teaches
What the rule teaches
5. Computing MRP
A shop's fifth worker adds 10 units of output a day, and each unit sells for 3 dollars. What is the fifth worker's marginal revenue product?
6. Applying the rule
The bakery's MRP schedule is 60, 50, 40, 30, 20 for bakers one through five. The daily wage is 35 dollars. How many bakers does the bakery hire?
7. The price lever
A worker's marginal product is 20 units and the product price rises from 2 dollars to 4 dollars. Compute the worker's new marginal revenue product in dollars, and write the number.
8. The demand that derives
Why is a firm's demand for labor called a derived demand?
9. To hire or not to hire
A shop's fourth worker adds 15 units of output a day, each unit sells for 5 dollars, and the daily wage is 60 dollars. Should the fourth worker be hired?
10. The repriced product
A worker's marginal product is 12 units a day, and the output price rises from 3 dollars to 5 dollars. Compute her new marginal revenue product in dollars, and write the number.
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