Markets for Factors of Production-LOS a 习题精选 2011, describe, between, derived, factors

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Session 5: Economics: Market Structure and Macroeconomic Analysis
Reading 21: Markets for Factors of Production

LOS a: Explain why demand for the factors of production is called derived demand, differentiate between marginal revenue and marginal revenue product (MRP), and describe how the MRP determines the demand for labor and the wage rate.

 

 

In a discussion about the factors that determine a firm’s demand for labor, Kathleen Jorgensen asserts the following:

Statement 1: A firm’s marginal revenue curve is equivalent to its short-run labor demand curve.

Statement 2: A decrease in the equilibrium market price of a firm’s product will increase the firm’s demand for labor because the firm will sell more units of the product.

Are Jorgensen’s statements CORRECT?

Statement 1

Statement 2

A) Correct Incorrect

B) Incorrect Incorrect

C) Correct Correct

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Both statements are incorrect. The marginal revenue product of labor (MRP) curve defines a firm’s short-run labor demand curve. MRP is the gain in total revenue from selling the additional output from employing one more unit of labor input. A decrease in the equilibrium market price of a good reduces the MRP of the labor used to produce that good. The result is a decrease in the firm’s demand for labor.

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Are the following two statements about the marginal revenue product (MRP) of a factor of production CORRECT?

Statement 1: In a price taker market, the MRP of an input is the marginal product of the input multiplied by the price of the output it generates.

Statement 2: If we compare any two productive inputs, the one with the higher MRP will earn greater economic rent.

Statement 1

Statement 2

A) Incorrect Correct

B) Correct Incorrect

C) Correct Correct

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Statement 1 is correct. MRP is the addition to total revenue from selling the output generated by one more unit of input. In a price taker market (i.e., perfect competition), marginal revenue is equal to price. Therefore, the MRP is the marginal product of the input times the output price. Statement 2 is incorrect. The extent to which a factor of production earns economic rent depends on the shape of its supply curve. An input with a high MRP might earn very little economic rent if the supply of the input is highly elastic. An input with a relatively lower MRP can earn significant economic rent if its supply is highly inelastic.

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The increase in total revenue from selling the additional output of one more unit of an input is called the input’s:

A) factor of production.

B) marginal revenue product.

C) marginal revenue.

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The marginal revenue product of an input is the addition to total revenue gained by selling the additional output from employing one more unit of that input.

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Marginal revenue product is best defined as the:

A) addition to total revenue from selling the additional output from using one more unit of an input.

B) gain in total revenue from selling one more unit of output.

C) additional output that results from employing one more unit of a productive input.

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The marginal revenue product is the addition to total revenue from selling the additional output that one more unit of an input can produce. The additional output that results from employing one more unit of a productive input is the marginal product. The gain in total revenue from selling one more unit of output is the marginal revenue. A marginal revenue product exists for any level of output; it is not limited to the level at which marginal revenue equals marginal cost.

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Hay farmers are in a perfectly competitive market. Assume that each acre of land produces 100 bushels of hay. The marginal revenue product of an acre of land is then:

A) price of hay per bushel.

B) 100 × (price of hay per bushel).

C) (price of hay per bushel)/100.

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The marginal revenue product of an input is the extra revenue generated by an additional unit of that input, which is an acre of land in this case. If the firm is a price taker, then the additional output from the additional input does not change the price of the final good. Thus, the marginal revenue product is simply the extra output times the price of the output.

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A shop foreman determines that an employee would produce two more units of output if he worked one additional hour. The product currently sells for $15.00 per unit and the firm is a price taker. Which of the following choices most accurately describes the relationship between the marginal revenue (MR) and marginal revenue product (MRP) from the additional hour of labor input?

A) MRP > MR.

B) MR = $15 and MRP < MR.

C) MRP = MR.

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By definition, the MR is the addition to total revenue from selling one more unit of output. The MRP is the revenue from selling the marginal product, which in this example is two units. Therefore the MRP must be greater than the MR.

luqian55

thanks a lot