Shifts in Labor Demand quiz #1 Flashcards
Shifts in Labor Demand quiz #1
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Which of the following factors will cause a decrease in the demand for labor? A decrease in the output price or the introduction of substitute (labor-saving) technology will cause a decrease in the demand for labor, shifting the labor demand curve to the left. Which of the following factors will result in an increase in the demand for labor? An increase in the output price or the introduction of complementary (labor-augmenting) technology will result in an increase in the demand for labor, shifting the labor demand curve to the right. How does a decrease in output price affect the marginal revenue product (MRP) and hiring decisions? A decrease in output price lowers the MRP, which may result in fewer workers being hired since the profit-maximizing quantity occurs where MRP equals wage. What is the formula for calculating marginal revenue product (MRP) in the context of labor demand? MRP is calculated as the output price multiplied by the marginal product of labor (MPL). Why does a labor-saving (substitute) technology shift the labor demand curve to the left? Labor-saving technology replaces workers, making it cheaper to use technology instead of labor, so firms demand fewer workers. What happens to equilibrium wage and quantity of labor when labor demand shifts left due to substitute technology? Both the equilibrium wage and the quantity of labor decrease when the labor demand curve shifts left. How does a labor-augmenting (complementary) technology affect the marginal product of labor (MPL)? Labor-augmenting technology increases the MPL, making each worker more productive. What is the impact on equilibrium wage and quantity of labor when labor demand shifts right due to complementary technology? Both the equilibrium wage and the quantity of labor increase when the labor demand curve shifts right. In the context of labor demand, what condition determines the profit-maximizing number of workers to hire? Firms hire workers up to the point where the marginal revenue product (MRP) equals the wage. Why does the marginal product of labor (MPL) remain unchanged when output price changes? MPL depends only on the number of workers and their productivity, not on the output price.
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