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Demand for Labor in Perfect Competition quiz #1 Flashcards

Demand for Labor in Perfect Competition quiz #1
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  • Which of the following correctly explains the effect of a variable on the labor demand curve?
    An increase in the demand for the good produced by labor will shift the labor demand curve to the right, increasing the quantity of labor demanded at each wage.
  • Which of the following is not true about the demand for labor?
    The demand for labor is not independent of the demand for the goods produced; it is a derived demand, meaning it depends on the demand for the final product.
  • Which of the following correctly explains the effect of a variable on the labor demand curve?
    A decrease in the marginal revenue product (MRP) of labor will shift the labor demand curve to the left, reducing the quantity of labor demanded at each wage.
  • Which of the following correctly explains the effect of a variable on the labor demand curve?
    An increase in the wage rate will cause a movement up along the labor demand curve, resulting in a lower quantity of labor demanded.
  • A firm's demand for labor is known as a derived demand because:
    It depends on the demand for the goods and services that the labor helps to produce.
  • Marginal revenue product (MRP) of labor refers to the:
    Additional revenue generated by hiring one more unit of labor.
  • What role do individuals play in the labor market compared to firms?
    Individuals are the suppliers of labor, while firms are the demanders of labor in the labor market.
  • How is the equilibrium wage determined in a perfectly competitive labor market?
    The equilibrium wage is found at the intersection of the labor supply and labor demand curves, where the quantity of labor supplied equals the quantity demanded.
  • What does the wage represent on the labor market graph?
    The wage represents the price of labor and is shown on the y-axis of the labor market graph.
  • Why does a firm's demand for labor change when the marginal revenue product changes?
    A firm's demand for labor changes because it hires workers up to the point where the marginal revenue product equals the wage; if MRP changes, the quantity of labor demanded at each wage also changes.