Markets for Factors of Production LOSB习题精选

The short run is defined at the period during which the quantities of other inputs are fixed. In the long run a firm’s demand for capital is more elastic because technology, the amount of labor, and the quantities of other inputs can be varied. A firm’s demand for labor is more elastic in the long run than in the short run. For a given increase in wage rates, a firm’s quantity of labor demand will decrease more when it can substitute other factors of production (the long run) than when other factors are fixed (the short run).

Labor produces its marginal output in the current period, when the labor is actually performed, so the demand curve is derived from the MRP of labor in the current period. With machinery, the output is generated over a number of periods, so the relevant MRP is the machine’s future MRP. The supply of a renewable resource is perfectly inelastic and demand determines the equilibrium price. With a non-renewable resource, supply is perfectly elastic and demand determines the equilibrium quantity supplied.

Statement 1 is incorrect. The fact that other factors of production are fixed makes labor demand less elastic in the short run. Statement 2 is correct. A firm will have more elastic labor demand when labor represents a larger proportion of its input costs.

If the price of the firm’s product decreases, its marginal revenue, and therefore the marginal revenue product of its inputs, will also decrease. This will decrease the firm’s demand for labor. Both remaining choices describe events that would be likely to increase the firm’s demand for labor.

For any productive input, including labor, a profit maximizing firm will employ additional units of the input until its marginal revenue product is equal to its price (the wage rate is the price of labor). If one more unit of labor would cost less than the value of its additional output, the firm will increase profits by adding that unit. Marginal product is measured in units of output and cannot be compared directly to marginal cost, which is measured in units of money.

The marginal revenue product curve of a resource for a given firm will directly determine the firm's demand curve for the resource. If the marginal revenue curve for a resource is steep, then the demand curve for the resource will be steep. Resource mobility is not determined by its MRP.

There is no reason to believe that an increased supply will cause a shift in the demand curve. There is no indication to whether a supplier will reduce the price to reflect the change in supply.