4) “The decision to employ an additional unit of labor depends on whether the value of the
marginal product of labor is greater than or less than the wage rate.” Is the previous statement
correct or incorrect?
5) What is the relationship between a firm’s value of the marginal product curve of labor and its
demand for labor curve? Explain why this relationship exists.
6) What factors other than the wage rate influence the demand for labor? How is demand
affected by changes in these factors?
7) What factors shift the demand for labor curve? Briefly describe the effect of each.
8) “In order for Charlie Trotter’s, an upscale restaurant in Chicago, to maximize profit from the
employment of chefs, the restaurant should hire chefs up to the point where the value of the
marginal product of chefs equals the wage rate for chefs.” Is the statement correct or incorrect?
9) Why does a profit-maximizing firm hire labor up to the point where the value of the marginal
product equals the wage rate?
10) Why do baseball players make so much money, while kindergarten teachers in private
schools make so much less? In your answer, discuss the value of the marginal product and the
actions of profit-maximizing firms.
11) How does a firm’s demand for labor change if the price of the firm’s product increases?
Relate your answer to the value of the marginal product.
12) The table below has the marginal product schedule for a firm. If the price of the product is $2
a unit, complete the table. If the wage rate is $8 an hour, how many workers does the firm hire?
13) The table above shows the total product schedule for Shines Car Wash. The market for car
washes is perfectly competitive and car washes sell for $5 each. The labor market is competitive
and the wage rate is $50 per day. What is the value of marginal product for each worker? How
many workers does the firm hire to maximize profit?
14) The table below has the marginal product schedule for Nick’s Pizza.
a. If pizza sells for $8 each, complete the last column of the table.
b. If Nick can hire workers at the going wage rate of $16 an hour, how many workers does Nick
hire?
15) Tom and Mary grow tomatoes. They can hire different numbers of college students to help
plant, cultivate, and harvest the tomatoes. The table below gives their marginal product schedule.
a. If the price of a pound of tomatoes is $2 a pound, complete the first value of the marginal
product column in the table. If Tom and Mary must pay their workers $10 an hour, how many
workers do they hire?
b. If the price of a pound of tomatoes falls to $1 a pound, complete the second value of the
marginal product column in the table. If Tom and Mary still must pay their workers $10 an hour,
how many workers do they hire?
c. When the price of a pound of tomatoes falls, what happens to Tom and Mary’s demand for
labor curve?
16) A worker has a marginal product of 15 units a day, each of which can be sold for $10. Is it
profitable to hire this worker if the wage rate is $100 a day? Briefly explain your answer.
18.7 Essay: Labor Markets
1) Is it possible for an individual to decrease the quantity of labor he or she supplies when the
wage rate increases? Briefly explain your answer.
2) In order to spend more time with her children, a young mother decides to work fewer hours as
her pay increases. What does her labor supply curve look like?
3) Explain why an individual’s labor supply curve is backward bending.
4) As the population of Las Vegas increased, what happened to the supply of labor and the
supply curve of labor in Las Vegas?
5) What happens to the supply of labor when more people pursue education and training? Be
sure to discuss what happens to both the supply of low-skilled and high-skilled labor.
6) The Small Bookshop hires teenagers who love books. How does each of the following
changes affect the supply and demand for workers for the Small Bookshop?
a. The Big Bookshop, a chain bookstore down the street, offers a higher wage rate.
b. More people buy books from Amazon.com.
c. People watch more television and read fewer books.
d. More older people who love to read move into the area where the Small Bookshop is located.
7) What tools can unions use to increase the demand for union labor?
8) Why does an increase in the minimum wage increase the demand for union labor?
9) The above figure represents the market for professional minor-league baseball umpires.
a. If umpires are offered $90 a game, what is the quantity of umpires supplied?
b. If umpires are offered $90 a game, is there a surplus or shortage of games umpired? What
does the shortage or surplus equal?
c. What is the equilibrium wage rate and quantity of umpires?
10) The above figure represents the market for teenage workers at fast-food restaurants in Kansas
City.
a. What is the equilibrium wage rate and employment?
b. Describe the market at a wage rate of $6 per hour.
c. Describe the market at a wage rate of $12 an hour.
d. How would an increase in the number of young, married college graduates, who tend to eat at
fast-food restaurants, affect the figure, the equilibrium wage rate, and employment?
18.8 Essay: Capital and Natural Resource Markets
1) If the quantity of capital supplied exceeds the quantity of capital demanded, what takes place?
2) Discuss the difference between renewable and nonrenewable resources. Given an example of
each.
3) Why is the supply of an nonrenewable natural resource perfectly elastic?
4) What is the Hotelling Principle? Have resource prices behaved as the principle predicts?