Revise later
SpaceTo flip
If confident
All Flashcards
How does increased demand for cars affect autoworkers?
Increased demand for cars leads to increased derived demand for autoworkers.
How do firms use MRP and MRC?
Firms hire workers as long as MRP ≥ MRC to maximize profit.
How does increased worker productivity affect labor demand?
Increased worker productivity increases the demand for labor.
How does a minimum wage affect a perfectly competitive labor market?
A minimum wage above the equilibrium wage can create a surplus of labor (unemployment).
How does a monopsony affect wages and employment?
A monopsony results in lower wages and less employment compared to a perfectly competitive market.
How does increased automation (capital) affect labor demand?
Increased automation (cheaper capital) may decrease the demand for labor if capital is a substitute.
How does increased value of leisure affect labor supply?
If people value leisure more, they will supply less labor, shifting the labor supply curve leftward.
How do occupational licensing requirements affect labor supply?
Occupational licensing requirements reduce the number of qualified workers, decreasing labor supply.
How does the MRP=MRC rule apply in a perfectly competitive labor market?
Firms hire workers up to the point where MRP = MRC = Wage, as the wage is constant.
How do firms minimize costs when hiring labor and capital?
Firms hire workers and buy capital until the marginal product per dollar spent is equal for all resources.
Differentiate between product and factor markets.
In product markets, households buy goods/services from firms. In factor markets, firms buy factors of production from households.
What are the key differences between perfect competition and monopsony in labor markets?
Perfect competition has many firms and wage-takers; monopsony has one buyer and wage-making power. Monopsony results in lower wages and employment.
Compare the MRC curve in perfect competition vs. monopsony.
In perfect competition, MRC is constant (horizontal). In monopsony, MRC is upward sloping and above the labor supply curve.
Compare the wage and quantity of labor in perfect competition and monopsony.
Perfect competition has higher wage and quantity of labor than monopsony.
Analyze a perfectly competitive labor market graph.
The market wage and quantity are determined by the intersection of market supply and demand for labor. Individual firms face a horizontal MRC curve at the market wage.
Analyze a monopsony labor market graph.
The MRC curve is above the labor supply curve. The monopsonist hires where MRP = MRC, but pays the wage on the labor supply curve at that quantity, resulting in lower wage and employment.
How does a minimum wage above equilibrium affect a perfectly competitive labor market graph?
It creates a surplus of labor (unemployment), shown by the quantity supplied exceeding the quantity demanded at the minimum wage.
What does the firm's demand curve for labor represent in perfect competition?
The firm's demand curve for labor is its MRP curve.