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CHAPTER18THEMARKETSFORTHEFACTORSOFPRODUCTIONMULTIPLECHOICE1MOSTOFTHETOTALINCOMEEARNEDINTHEUSECONOMYISULTIMATELYPAIDTOHOUSEHOLDSINTHEFORMOFAPROFITBRENTCINTERESTDWAGESANSDPTS1DIF1REF180TOPFACTORMARKETSMSCDEFINITIONAL2INTHEUNITEDSTATESECONOMY,WHICHOFTHEFOLLOWINGFACTORSOFPRODUCTIONISCONSIDEREDTOBETHEMOSTIMPORTANTINTERMSOFTHEMAGNITUDEOFINCOMEEARNEDBYTHATFACTOROFPRODUCTIONALANDBLABORCPROFITDCAPITALANSBPTS1DIF1REF180TOPFACTORMARKETSMSCDEFINITIONAL3HOWMUCHOFTHEINCOMEINTHEUNITEDSTATESISEARNEDBYWORKERSINTHEFORMOFWAGESANDFRINGEBENEFITSAMORETHAN90PERCENTBABOUT75PERCENTCABOUT50PERCENTDLESSTHAN75PERCENTANSBPTS1DIF1REF180TOPFACTORMARKETSMSCDEFINITIONAL4THEFACTORSOFPRODUCTIONAREBESTDEFINEDASTHEAOUTPUTPRODUCEDFROMRAWMATERIALSBINPUTSUSEDTOPRODUCEGOODSANDSERVICESCWAGESPAIDTOTHEWORKFORCEDGOODSANDSERVICESSOLDINTHEMARKETANSBPTS1DIF1REF181TOPFACTORMARKETSMSCDEFINITIONAL5ECONOMISTSREFERTOTHEINPUTSTHATFIRMSUSETOPRODUCEGOODSANDSERVICESASADERIVEDFACTORSBDERIVEDRESOURCESCFACTORSOFPRODUCTIONDINSTRUMENTSOFREVENUEANSCPTS1DIF1REF181TOPFACTORSOFPRODUCTIONMSCDEFINITIONAL6BECAUSEAFIRMSDEMANDFORAFACTOROFPRODUCTIONISDERIVEDFROMITSDECISIONTOSUPPLYAGOODINTHEMARKET,ITISCALLEDAADIFFERENTIATEDDEMANDBSECONDARYDEMANDCDERIVEDDEMANDDHYBRIDDEMANDSUPPLYANSCPTS1DIF1REF181TOPFACTORMARKETSMSCDEFINITIONAL7THETERM“FACTORMARKET“APPLIESTOTHEMARKETFORALABORBCAPITALCLANDDALLOFTHEABOVEARECORRECTANSDPTS1DIF1REF181TOPFACTORMARKETSMSCDEFINITIONAL8FACTORMARKETSAREDIFFERENTFROMPRODUCTMARKETSINANIMPORTANTWAYBECAUSEAEQUILIBRIUMISTHEEXCEPTION,ANDNOTTHERULE,INFACTORMARKETSBTHEDEMANDFORAFACTOROFPRODUCTIONISADERIVEDDEMANDCTHEDEMANDFORAFACTOROFPRODUCTIONISLIKELYTOBEUPWARDSLOPING,INVIOLATIONOFTHELAWOFDEMANDDALLOFTHEABOVEARECORRECTANSBPTS1DIF2REF181TOPFACTORMARKETSMSCINTERPRETIVE9FACTORMARKETANALYSISCOULDNOTBECOMPLETEWITHOUTSOMECHARACTERIZATIONOFAPRODUCTMARKETDEMANDBTHEMARGINALPRODUCTIVITIESOFTHEDIFFERENTFACTORSCMARKETPRICESFORFINALGOODSANDSERVICESDALLOFTHEABOVEARECORRECTANSDPTS1DIF2REF181TOPFACTORMARKETSMSCINTERPRETIVE10THEBASICTOOLSOFSUPPLYANDDEMANDAPPLYTOAMARKETSFORGOODSANDSERVICESANDTOMARKETSFORLABORSERVICESBMARKETSFORGOODSANDSERVICESBUTNOTTOMARKETSFORLABORSERVICESCMARKETSFORGOODSANDSERVICESBUTNOTTOMARKETSFORFACTORSOFPRODUCTIONDALLMARKETSEXCEPTTHOSEINWHICHDEMANDISDERIVEDDEMANDANSAPTS1DIF2REF181TOPFACTORSOFPRODUCTIONMSCINTERPRETIVE11LABORMARKETSAREDIFFERENTFROMMOSTOTHERMARKETSBECAUSELABORDEMANDISAREPRESENTEDBYAVERTICALLINEONASUPPLYDEMANDDIAGRAMBREPRESENTEDBYANUPWARDSLOPINGLINEONASUPPLYDEMANDDIAGRAMCSUCHANELUSIVECONCEPTDDERIVEDANSDPTS1DIF1REF181TOPFACTORSOFPRODUCTIONMSCINTERPRETIVE12WHICHOFTHEFOLLOWINGBESTILLUSTRATESTHECONCEPTOF“DERIVEDDEMAND“AANINCREASEINTHEWAGESOFAUTOWORKERSWILLLEADTOANINCREASEINTHEDEMANDFORROBOTSINAUTOMOBILEFACTORIESBANAUTOMOBILEPRODUCERSDECISIONTOSUPPLYMORECARSWILLLEADTOANINCREASEINTHEDEMANDFORAUTOMOBILEPRODUCTIONWORKERSCANAUTOMOBILEPRODUCERSDECISIONTOSUPPLYMOREMINIVANSRESULTSFROMADECREASEINTHEDEMANDFORSTATIONWAGONSDANINCREASEINTHEPRICEOFGASOLINEWILLLEADTOANINCREASEINTHEDEMANDFORSMALLCARSANSBPTS1DIF2REF181TOPLABORDEMANDMSCINTERPRETIVE13WHENAFIRMISAPROFITMAXIMIZERAITISDRIVENTOPRODUCEASMUCHOFITSPRODUCTASPOSSIBLEBITWILLMEASUREITSSUCCESSBYTHENUMBEROFEMPLOYEESITHASCITSREVENUEWILLALWAYSBEMAXIMIZEDASWELLDITDOESNOTCAREDIRECTLYABOUTTHENUMBEROFWORKERSITHIRESANSDPTS1DIF2REF181TOPLABORDEMANDMSCINTERPRETIVE14FORACOMPETITIVE,PROFITMAXIMIZINGFIRM,THELABORDEMANDCURVEISTHESAMEASTHEAMARGINALCOSTCURVEBVALUEOFMARGINALPRODUCTCURVECPRODUCTIONFUNCTIONDPROFITFUNCTIONANSBPTS1DIF2REF181TOPLABORDEMANDMSCANALYTICAL15FORACOMPETITIVEFIRMTHATFINDSITWORTHWHILETOOPERATERATHERTHANSHUTDOWN,PROFITMAXIMIZATIONREQUIRESTHATAOUTPUTPRICEMARGINALCOSTBWAGEVALUEOFMARGINALPRODUCTOFLABORCWAGE/MARGINALPRODUCTOFLABORPDALLOFTHEABOVEARECORRECTANSDPTS1DIF2REF181TOPLABORDEMANDMSCAPPLICATIVE16WHATCAUSESTHELABORDEMANDCURVETOSHIFTICHANGESINPRODUCTIVITYIICHANGESINWAGESIIICHANGESINOUTPUTPRICESAIANDIIBIIANDIIICIANDIIIDALLOFTHEABOVEARECORRECTANSCPTS1DIF2REF181TOPLABORDEMANDMSCAPPLICATIVE17IFTHEPRICEOFAIRLINETICKETSFALLS,WHATWILLHAPPENTOTHEDEMANDCURVEFORFLIGHTATTENDANTSAITWILLSHIFTTOTHERIGHTBITWILLSHIFTTOTHELEFTCTHEDIRECTIONOFTHESHIFTISAMBIGUOUSDITWILLREMAINUNCHANGEDANSBPTS1DIF2REF181TOPLABORDEMANDMSCAPPLICATIVE18IFCONSUMERSDEMANDMOREGENETICALLYENGINEEREDFOODS,THENTHEVALUEOFGENETICENGINEERSMARGINALPRODUCTOFLABORWILLARISEBFALLCREMAINUNCHANGEDDRISEORFALLEITHERISPOSSIBLEANSAPTS1DIF2REF181TOPLABORDEMANDMSCAPPLICATIVE19COMPETITIVEFIRMSDECIDEHOWMUCHOUTPUTTOSELLBYPRODUCINGOUTPUTUNTILTHEPRICEOFTHEGOODEQUALSAMARGINALPRODUCTBTHEVALUEOFMARGINALPRODUCTCMARGINALCOSTDMARGINALPROFITANSCPTS1DIF2REF181TOPLABORDEMANDMSCAPPLICATIVE20COMPETITIVEFIRMSHIREWORKERSUNTILTHEADDITIONALBENEFITTHEYRECEIVEFROMTHELASTWORKERHIREDISEQUALTOITHEADDITIONALCOSTOFTHATWORKERIITHEWAGEPAIDTOTHATWORKERIIITHEMARGINALPRODUCTOFTHATWORKERAIONLYBIIIONLYCIANDIIDIIANDIIIANSCPTS1DIF2REF181TOPLABORDEMANDMSCANALYTICAL21DANOWNSONEOFTHEMANYBAKERIESINNEWYORKCITYWHICHOFTHEFOLLOWINGEVENTSWILLLEADTOANINCREASEINDANSDEMANDFORTHESERVICESOFBAKERSITHEPRICEOFMUFFINSINCREASESMUFFINSAREDANSSPECIALTYIIDANADDSTHREENEWOVENSTOTHEKITCHENAREATOHELPTHEBAKERSWORKFASTERIIILOCALBAKERSFORMAUNIONTOPROTECTTHEMSELVESFROMLOWWAGESAIANDIIBIIANDIIICIANDIIIDALLOFTHEABOVEARECORRECTANSAPTS1DIF2REF181TOPLABORDEMANDMSCAPPLICATIVE22CHARLESOWNSONEOFTHEMANYBAKERIESINNEWYORKCITYWHICHOFTHEFOLLOWINGEVENTSWILLLEADTOADECREASEINCHARLESSDEMANDFORTHESERVICESOFBAKERSAHOLLYWOODGLAMORIZATIONOFANEWMOVIEABOUTABAKERLEADSHUNDREDSOFHIGHSCHOOLSTUDENTSINNEWYORKCITYTOAPPLYFORAJOBATDANSBTHEPRICEOFBAKEDGOODSFALLSCTHELOCALBAKERSFORMAUNIONDALLOFTHEABOVEARECORRECTANSBPTS1DIF2REF181TOPLABORDEMANDMSCAPPLICATIVE23ASANDWICHSHOPHIRESWORKERSTOMAKESANDWICHESANDSELLTHEMTOCUSTOMERSIFTHEFIRMISCOMPETITIVEINBOTHTHEMARKETFORSANDWICHESANDINTHEMARKETFORSANDWICHMAKERS,THENITHASASOMECONTROLOVERBOTHTHEPRICEOFSANDWICHESANDTHEWAGEITPAYSTOITSWORKERSBNOCONTROLOVERTHEPRICEOFSANDWICHESBUTSOMECONTROLOVERTHEWAGEITPAYSTOITSWORKERSCSOMECONTROLOVERTHEPRICEOFSANDWICHESBUTNOCONTROLOVERTHEWAGEITPAYSTOITSWORKERSDNOCONTROLOVEREITHERTHEPRICEOFSANDWICHESORTHEWAGEITPAYSTOITSWORKERSANSDPTS1DIF1REF181TOPLABORDEMANDMSCAPPLICATIVE24WHICHOFTHEFOLLOWINGEVENTSCOULDINCREASETHEDEMANDFORLABORAADECREASEINOUTPUTPRICEBADECREASEINTHEAMOUNTOFCAPITALAVAILABLEFORWORKERSTOUSECANINCREASEINTHEMARGINALPRODUCTIVITYOFWORKERSDALLOFTHEABOVEARECORRECTANSCPTS1DIF2REF181TOPLABORDEMANDMSCAPPLICATIVE25WHICHOFTHEFOLLOWINGEVENTSCOULDDECREASETHEDEMANDFORLABORAANINCREASEINMIGRANTWORKERSBANINCREASEINTHEMARGINALPRODUCTIVITYOFWORKERSCADECREASEINDEMANDFORTHEFINALPRODUCTPRODUCEDBYLABORDADECREASEINTHELABORSUPPLYANSCPTS1DIF2REF181TOPLABORDEMANDMSCAPPLICATIVE26WHENWEFOCUSONTHEFIRMASASUPPLIEROFAGOODORASERVICE,WEASSUMETHATTHEFIRMISAPROFITMAXIMIZERWHENWEFOCUSONTHEFIRMASADEMANDEROFLABOR,WEASSUMETHATTHEFIRMSOBJECTIVEISTOAMINIMIZEWAGESBMINIMIZEVARIABLECOSTSCMAXIMIZETHENUMBEROFWORKERSHIREDDMAXIMIZEPROFITANSDPTS1DIF1REF181TOPLABORDEMANDMSCINTERPRETIVE27SUPPOSETHATANEWINVENTIONINCREASESTHEMARGINALPRODUCTIVITYOFLABOR,SHIFTINGLABORDEMANDTOTHERIGHTSUCHANINVENTIONWOULDBEANEXAMPLEOFALABORSAVINGTECHNOLOGYBLABORAUGMENTINGTECHNOLOGYCLUDDITETECHNOLOGYDSUPPLYSHIFTINGTECHNOLOGYANSBPTS1DIF1REF181TOPLABORDEMANDMSCDEFINITIONAL28SUPPOSETHATANEWINVENTIONDECREASESTHEMARGINALPRODUCTIVITYOFLABOR,SHIFTINGLABORDEMANDTOTHELEFTSUCHANINVENTIONWOULDBEANEXAMPLEOFALABORSAVINGTECHNOLOGYBLABORAUGMENTINGTECHNOLOGYCLUDDITETECHNOLOGYDSUPPLYSHIFTINGTECHNOLOGYANSAPTS1DIF1REF181TOPLABORDEMANDMSCDEFINITIONAL29LABORSAVINGTECHNOLOGYCAUSESWHICHOFTHEFOLLOWINGITHEMARGINALPRODUCTIVITYOFLABORINCREASESIITHEMARGINALPRODUCTIVITYOFLABORDECREASESIIILABORDEMANDSHIFTSTOTHERIGHTIVLABORDEMANDSHIFTSTOTHELEFTAIONLYBIIONLYCIANDIIIDIIANDIVANSDPTS1DIF2REF181TOPLABORDEMANDMSCINTERPRETIVE30LABORAUGMENTINGTECHNOLOGYCAUSESWHICHOFTHEFOLLOWINGITHEMARGINALPRODUCTIVITYOFLABORINCREASESIITHEMARGINALPRODUCTIVITYOFLABORDECREASESIIILABORDEMANDSHIFTSTOTHERIGHTIVLABORDEMANDSHIFTSTOTHELEFTAIONLYBIIONLYCIANDIIIDIIANDIVANSCPTS1DIF2REF181TOPLABORDEMANDMSCINTERPRETIVE31THETERMLUDDITEISUSEDTODESCRIBEAAPERSONWHOREADILYADOPTSTHELATESTTECHNOLOGICALADVANCESBAPERSONWHOFEARSCOMPUTERSCAPERSONWHOOPPOSESTECHNOLOGICALADVANCESDANYMYTHICALHISTORICALFIGUREANSCPTS1DIF1REF181TOPLABORDEMANDMSCDEFINITIONAL32ALUDDITEWOULDBEEXPECTEDTOFEARALABORSAVINGTECHNOLOGIESBLABORAUGMENTINGTECHNOLOGIESCSUPPLYSHIFTINGTECHNOLOGIESDTHECHAIRMANOFTHEFEDERALRESERVEANSAPTS1DIF1REF181TOPLABORDEMANDMSCINTERPRETIVE33ALONGTHEVERTICALAXISOFTHEPRODUCTIONFUNCTIONWETYPICALLYMEASUREAREVENUEBTHEMARGINALPRODUCTOFTHEINPUTCTHEQUANTITYOFINPUTDTHEQUANTITYOFOUTPUTANSDPTS1DIF1REF181TOPPRODUCTIONFUNCTIONMSCDEFINITIONAL34ALONGTHEHORIZONTALAXISOFTHEPRODUCTIONFUNCTIONWETYPICALLYMEASUREAREVENUEBTHEMARGINALPRODUCTOFTHEINPUTCTHEQUANTITYOFINPUTDTHEQUANTITYOFOUTPUTANSCPTS1DIF1REF181TOPPRODUCTIONFUNCTIONMSCDEFINITIONAL35ACOMPETITIVEFIRMSELLSITSOUTPUTFOR45PERUNITTHEMARGINALPRODUCTOFTHE30THWORKERIS4UNITSOFOUTPUTPERDAYTHEMARGINALPRODUCTOFTHE31STWORKERIS3UNITSOFOUTPUTPERDAYTHEFIRMPAYSITSWORKERSAWAGEOF150PERDAYAFORTHE31STWORKER,THEMARGINALPROFITIS135BFORTHE30THWORKER,THEVALUEOFTHEMARGINALPRODUCTOFLABORIS600CFORTHE30THWORKER,THEMARGINALPROFITIS180DNONEOFTHEABOVEISCORRECTANSDPTS1DIF3REF181TOPLABORDEMANDMSCANALYTICAL36AURORACUSTOMCABINETSPRODUCESANDSELLSCUSTOMKITCHENCABINETSTHEFIRMHASDETERMINEDTHATIFITHIRES10WORKERS,ITCANPRODUCE4SETSOFCABINETSPERDAYIFITHIRES11WORKERS,ITCANPRODUCE42SETSOFCABINETSPERDAYITSELLSEACHSETOFCABINETSFOR2,000,ANDITPAYSEACHOFITSWORKERS200PERDAYAFORTHE11THWORKER,THEVALUEOFTHEMARGINALPRODUCTOFLABORIS500BFORTHE11THWORKER,THEMARGINALREVENUEPRODUCTIS400CTHEFIRMISMAXIMIZINGITSPROFITDIFTHEFIRMISEMPLOYING11WORKERS,THENITSPROFITWOULDINCREASEIFITCUTBACKTO10WORKERSANSBPTS1DIF3REF181TOPLABORDEMANDMSCANALYTICAL37FORACOMPETITIVE,PROFITMAXIMIZINGFIRM,THEDEMANDCURVEFORLABORWILLSHIFTINRESPONSETOACHANGEINTHEAWAGERATEBQUANTITYOFLABORDEMANDEDCPRICEOFTHEPRODUCTTHATTHEFIRMSELLSDALLOFTHEABOVEARECORRECTANSCPTS1DIF2REF181TOPLABORDEMANDMSCAPPLICATIVE38OMEGACUSTOMCABINETSPRODUCESANDSELLSCUSTOMBATHROOMVANITIESTHEFIRMHASDETERMINEDTHATIFITHIRES10WORKERS,ITCANPRODUCE20VANITIESPERWEEKIFITHIRES11WORKERS,ITCANPRODUCE22VANITIESPERWEEKITSELLSEACHVANITYFOR800,ANDITPAYSEACHOFITSWORKERS1,000PERWEEKAFORTHE11THWORKER,THEMARGINALPROFITIS600BFORTHE11THWORKER,THEMARGINALREVENUEPRODUCTIS2,000CTHEFIRMISMAXIMIZINGITSPROFITDIFTHEFIRMISEMPLOYING11WORKERS,THENITSPROFITWOULDINCREASEIFITCUTBACKTO10WORKERSANSAPTS1DIF3REF181TOPPRODUCTIONFUNCTIONMSCANALYTICAL39SUPPOSETHATWORKERSWHOSORTOUTGOINGMAILFORACOMPANYUSERUBBERBANDSTOGROUPMAILIFTHEREWEREANINCREASEINTHESUPPLYOFRUBBERBANDS,WHICHOFTHEFOLLOWINGWOULDHAPPENINTHEMARKETFORLABORADEMANDWOULDDECREASEBDEMANDWOULDINCREASECSUPPLYWOULDDECREASEDSUPPLYWOULDINCREASEANSBPTS1DIF2REF181TOPLABORDEMANDMSCAPPLICATIVESCENARIO181GERTRUDEKELPOWNSTHREEBOATSTHATPARTICIPATEINCOMMERCIALFISHINGFORFRESHPACIFICSALMONOFFTHECOASTOFALASKAASPARTOFHERBUSINESSSHEHIRESACAPTAINANDSEVERALCREWMEMBERSFOREACHBOATINTHEMARKETFORFRESHPACIFICSALMON,THEREARETHOUSANDSOFFIRMSLIKEGERTRUDESWHILEGERTRUDEUSUALLYCATCHESASIGNIFICANTNUMBEROFFISHEACHYEAR,HERCONTRIBUTIONTOTHEENTIREHARVESTOFSALMONISNEGLIGIBLERELATIVETOTHESIZEOFTHEMARKET40REFERTOSCENARIO181BASEDONTHEGIVENINFORMATION,ITISLIKELYTHATGERTRUDESFIRMHASASOMEINFLUENCEOVERTHEWAGESPAIDTOCREWMEMBERSBUTNOINFLUENCEOVERTHEPRICEOFSALMONBSOMEINFLUENCEOVERTHEPRICEOFSALMONBUTNOINFLUENCEOVERTHEWAGESPAIDTOCREWMEMBERSCSOMEINFLUENCEOVERBOTHTHEPRICEOFSALMONANDTHEWAGESPAIDTOCREWMEMBERSDNOINFLUENCEOVEREITHERTHEPRICEOFSALMONORTHEWAGESPAIDTOCREWMEMBERSANSDPTS1DIF2REF181TOPLABORDEMANDMSCAPPLICATIVE41REFERTOSCENARIO181WHENGERTRUDEPARTICIPATESINTHELABORMARKETTOHIRECREWMEMBERSFORHERBOATS,SHEISMOSTLIKELYCONSIDEREDAADEMANDEROFLABORSERVICESBSUPPLIEROFLABORSERVICESCDEMANDEROFCAPITALDSUPPLIEROFCAPITALANSAPTS1DIF1REF181TOPLABORDEMANDMSCAPPLICATIVE42REFERTOSCENARIO181IFTHEPRICEOFFRESHPACIFICSALMONWERETODECREASESIGNIFICANTLY,ITISMOSTLIKELYTHATGERTRUDEWOULDAREDUCEHERDEMANDFORCREWMEMBERSBHIREMOREBOATSCBECOMEASELLERINATLEASTONEFACTORMARKETDHIREMORECREWMEMBERSANSAPTS1DIF2REF181TOPLABORDEMANDMSCAPPLICATIVE43REFERTOSCENARIO181IFGERTRUDEISACOMPETITORINBOTHTHEFRESHPACIFICSALMONMARKETANDINTHEMARKETFORCREWMEMBERS,SHEISCALLEDAPRICEATAKERINTHESALMONMARKETANDAWAGESETTERINTHECREWMARKETBTAKERINTHECREWMARKETANDAPRICESETTERINTHESALMONMARKETCTAKERINBOTHMARKETSDSETTERINBOTHMARKETSANSCPTS1DIF2REF181TOPLABORDEMANDMSCAPPLICATIVE44REFERTOSCENARIO181INTHEFRESHPACIFICSALMONPRODUCTMARKET,GERTRUDEHASSOMECONTROLOVERATHEPRICESHECHARGESFORHERFRESHSALMONBTHEQUANTITYOFFRESHSALMONTHATSHECATCHESANDSUPPLIESTOTHEMARKETCTHECOMPETITIVEENVIRONMENTOFTHEMARKETDALLOFTHEABOVEARECORRECTANSBPTS1DIF1REF181TOPLABORDEMANDMSCAPPLICATIVE45REFERTOSCENARIO181IFGERTRUDEISAPRICETAKERINTHELABORMARKET,SHEDECIDESATHEPRICEFORWHICHSHEWILLSELLTHEFISHSHECATCHESBHOWMANYCREWMEMBERSSHEWILLHIRECTHEWAGESTHATSHEWILLPAYTOHERCREWMEMBERSDALLOFTHEABOVEARECORRECTANSBPTS1DIF1REF181TOPLABORDEMANDMSCAPPLICATIVE46REFERTOSCENARIO181LABORMARKETTHEORYASSUMESTHATGERTRUDESDEMANDFORCREWMEMBERSANDHERSUPPLYOFFRESHPACIFICSALMONRESULTFROMHERAINTRINSICDESIRETOHIRECREWMEMBERSBPRIMARYGOALOFMAXIMIZINGPROFITCALTRUISTICMOTIVESTOPROVIDEFRESHSALMONTOCONSUMERSDDESIRETOSTRIKEABALANCEBETWEENENVIRONMENTALCONCERNSANDMAXIMUMPROFITANSBPTS1DIF1REF181TOPLABORDEMANDMSCAPPLICATIVE47THEFOLLOWINGTABLESHOWSTHENUMBEROFCALCULATORSTHATCANBEASSEMBLEDPERWEEKBYVARIOUSNUMBERSOFWORKERSIFTHEPRICEPERCALCULATORINAPERFECTLYCOMPETITIVEPRODUCTMARKETIS20,HOWMANYWORKERSWOULDTHEFIRMEMPLOYIFTHEWEEKLYWAGERATEIS1000QUANTITYOFNUMBEROFCALCULATORSLABORPERWEEK001602160324042805300A1B2C3D4ANSCPTS1DIF3REF181TOPMARGINALPRODUCTOFLABOR|VALUEOFTHEMARGINALPRODUCTMSCANALYTICAL48BILLISTRYINGTOCONVINCETHEOWNEROFAPIZZASHOPTOHIREHIMHEARGUESTHATHECOULDHELPTHESHOPSELLANADDITIONALFIVEPIZZASPERDAYATTHEMARKETPRICEOF8EACHIFTHEFACTSARENOTINDISPUTE,BUTTHEOWNERDOESNOTHIREHIM,THENATHEWAGERATEMUSTBELESSTHAN40PERDAYBHIRINGBILLWOULDINVOLVEANEGATIVEMARGINALPRODUCTCTHEWAGERATEMUSTBEMORETHAN40PERDAYDTHEWAGERATEMUSTBELESSTHAN8PERDAYANSCPTS1DIF2REF181TOPMARGINALPRODUCTOFLABOR|VALUEOFTHEMARGINALPRODUCTMSCANALYTICAL49SUPPOSETHATEIGHTWORKERSCANMANUFACTURE70RADIOSPERDAY,ANDNINEWORKERSCANMANUFACTURE90RADIOSPERDAYIFRADIOSCANBESOLDFOR10EACH,THEVALUEOFMARGINALPRODUCTOFTHENINTHWORKERISA20RADIOSB90RADIOSC200D900ANSCPTS1DIF2REF181TOPVALUEOFTHEMARGINALPRODUCTMSCANALYTICAL50VALUEOFMARGINALPRODUCTISDEFINEDASTHEADDITIONALAOUTPUTAFIRMWOULDRECEIVEAFTERHIRINGONEMOREFACTOROFPRODUCTIONBCOSTOFHIRINGONEMOREFACTOROFPRODUCTIONCREVENUEEARNEDFROMSELLINGONEMOREUNITOFPRODUCTDREVENUEEARNEDFROMHIRINGONEMOREFACTOROFPRODUCTIONANSDPTS1DIF1REF181TOPVALUEOFTHEMARGINALPRODUCTMSCDEFINITIONAL51THEMARGINALPRODUCTOFLABORISDEFINEDASTHECHANGEINAOUTPUTPERADDITIONALUNITOFREVENUEBOUTPUTPERADDITIONALUNITOFLABORCREVENUEPERADDITIONALUNITOFLABORDREVENUEPERADDITIONALUNITOFOUTPUTANSBPTS1DIF1REF181TOPMARGINALPRODUCTOFLABORMSCDEFINITIONAL52THEMARGINALPRODUCTOFLABORISATHEINCREASEINTHEAMOUNTOFOUTPUTFROMANADDITIONALUNITOFLABORBTHETOTALAMOUNTOFOUTPUTDIVIDEDBYTHETOTALUNITSOFLABORCTOTALREVENUEMINUSTOTALCOSTDALSOCALLEDTHEMARGINALPROFITANSAPTS1DIF1REF181TOPMARGINALPRODUCTOFLABORMSCDEFINITIONALTABLE181QUANTITYOFNUMBEROFBASEBALLSLABORPERDAY001100224033604440550053REFERTOTABLE181THISTABLEDESCRIBESTHENUMBEROFBASEBALLSAMANUFACTURERCANPRODUCEPERDAYWITHDIFFERENTQUANTITIESOFLABOREACHBASEBALLSELLSFOR5INACOMPETITIVEMARKETFORWHICHLEVELOFEMPLOYMENTISTHEMARGINALPRODUCTOFLABORGREATESTA1WORKERB2WORKERSC3WORKERSD4WORKERSANSBPTS1DIF3REF181TOPMARGINALPRODUCTOFLABORMSCANALYTICAL54REFERTOTABLE181THISTABLEDESCRIBESTHENUMBEROFBASEBALLSAMANUFACTURERCANPRODUCEPERDAYWITHDIFFERENTQUANTITIESOFLABOREACHBASEBALLSELLSFOR5INACOMPETITIVEMARKETWHATISTHETOTALREVENUEPERDAYTHATTHEFIRMWILLEARNIFITEMPLOYSFIVEWORKERSA500B300C2200D2500ANSDPTS1DIF2REF181TOPMARGINALPRODUCTOFLABOR|VALUEOFTHEMARGINALPRODUCTMSCANALYTICAL55REFERTOTABLE181THISTABLEDESCRIBESTHENUMBEROFBASEBALLSAMANUFACTURERCANPRODUCEPERDAYWITHDIFFERENTQUANTITIESOFLABOREACHBASEBALLSELLSFOR5INACOMPETITIVEMARKETIFTHEFIRMISMAXIMIZINGTHEMARGINALPRODUCTOFLABOR,WHATISTHEFIRMSMARGINALREVENUEPRODUCTA140BASEBALLSB300C400D700ANSDPTS1DIF2REF181TOPVALUEOFTHEMARGINALPRODUCTMSCANALYTICAL56WHENLABORISTHEONLYINPUTAFIRMUSES,THEMARGINALCOSTOFAUNITOFOUTPUTCANBEDEFINEDASAMARGINALREVENUEMULTIPLIEDBYWAGEBMARGINALPRODUCTOFLABORMULTIPLIEDBYWAGECWAGEDIVIDEDBYMARGINALPRODUCTOFLABORDMARGINALPRODUCTOFLABORDIVIDEDBYWAGEANSCPTS1DIF3REF181TOPLABORDEMANDMSCANALYTICALTABLE182CONSIDERTHEFOLLOWINGDAILYPRODUCTIONDATAFORDAVISGOLFBALLS,INCDAVISGOLFBALLS,INCSELLSGOLFBALLSFOR50CENTSEACHANDPAYSTHEWORKERSAWAGEOF30ADAYLABORNUMBEROFWORKERSQUANTITYGOLFBALLSPERDAYMARGINALPRODUCTOFLABORGOLFBALLSPERDAYVALUEOFTHEMARGINALPRODUCTOFLABORWAGEPERDAYMARGINALPROFIT0011002250337544755550660057REFERTOTABLE182WHATISTHETHIRDWORKERSMARGINALPRODUCTOFLABORA75GOLFBALLSB100GOLFBALLSC125GOLFBALLSD150GOLFBALLSANSCPTS1DIF2REF181TOPMARGINALPRODUCTOFLABORMSCANALYTICAL58REFERTOTABLE182WHATISTHEFOURTHWORKERSMARGINALPRODUCTOFLABORA50GOLFBALLSB75GOLFBALLSC100GOLFBALLSD125GOLFBALLSANSCPTS1DIF2REF181TOPMARGINALPRODUCTOFLABORMSCANALYTICAL59REFERTOTABLE182WHATISTHESIXTHWORKERSMARGINALPRODUCTOFLABORA375GOLFBALLSB50GOLFBALLSC75GOLFBALLSD100GOLFBALLSANSBPTS1DIF2REF181TOPMARGINALPRODUCTOFLABORMSCANALYTICAL60REFERTOTABLE182WHATISTHEVALUEOFTHEMARGINALPRODUCTOFTHESECONDWORKERA50B6250C75D150ANSCPTS1DIF3REF181TOPVALUEOFTHEMARGINALPRODUCTMSCANALYTICAL61REFERTO182WHATISTHEVALUEOFTHEMARGINALPRODUCTOFTHEFIFTHWORKERA750B25C3750D75ANSCPTS1DIF3REF181TOPVALUEOFTHEMARGINALPRODUCTMSCANALYTICAL62REFERTOTABLE182WHATISTHEVALUEOFTHEMARGINALPRODUCTOFTHEFIRSTWORKERA25B50C75D100ANSBPTS1DIF3REF181TOPVALUEOFTHEMARGINALPRODUCTMSCANALYTICAL63REFERTOTABLE182THEMARGINALPRODUCTOFLABORBEGINSTODIMINISHWITHTHEADDITIONOFWHICHWORKERATHE1STWORKERBTHE2NDWORKERCTHE3RDWORKERDTHE4THWORKERANSCPTS1DIF3REF181TOPDIMINISHINGMARGINALPRODUCTMSCANALYTICAL64REFERTOTABLE182WHATISTHEMARGINALPROFITOFTHEFOURTHWORKERA750B20C50D100ANSBPTS1DIF3REF181TOPMARGINALPRODUCTOFLABOR|VALUEOFTHEMARGINALPRODUCTMSCANALYTICAL65REFERTOTABLE182WHATISTHEMARGINALPROFITOFTHESIXTHWORKERA10B5C750D25ANSBPTS1DIF3REF181TOPMARGINALPRODUCTOFLABOR|VALUEOFTHEMA
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