1. Explain how a firm’s production function is related to its marginal product of labor,
how a firm’s marginal product of labor is related to the value of its marginal product, and
how a firm’s value of marginal product is related to its demand for labor.
2. Explain how the wage can adjust to balance the supply and demand for labor while
simultaneously equaling the value of the marginal product of labor.
3. If the population of the United States suddenly grew because of a large wave of
immigration, what would happen to wages? What would happen to the rents earned by
the owners of land and capital?
4. In what sense is education a type of capital?
5. What conditions lead to highly compensated superstars? Would you expect to see
superstars in dentistry? In music? Explain.
