from the graph identify the equilibrium wage rate, the employment level, the opportunity cost and the economic rent. Concept Introduction: Economic Rent: the extra amount earned by a resource (e.g. land, capital, or labor) by the quality of its current use Opportunity Cost: the next best alternative forgone when making a decision between choices Equilibrium wage rate: the intersection of demand and supply of labor Demand for labor: this is a concept that defines the amount of demand for labor that an economy or firm is willing to employ at a given point of time.

Question

1. Economic rent The following graph shows a competitive labor market. (? 50 Labor Demand 40 Labor Supply Labor Supply Economic Rent Labor Demand 10 Opportunity Cost 2 4 6 10 QUANTITY OF LABOR (Billions of hours) Based on the graph, the total amount paid to workers in this market (that is, total labor earnings) is On the graph, use the green triangle (triangle symbols) to shade the portion of labor earnings that consists of economic rent. Then, use the purple quadrilateral (diamond symbols) to shade the portion of labor earnings that consists of opportunity cost. WAGE RATE (Dollars per hour)

Answer 1

Question

Chapter 11, Problem 6P

A

To determine

from the graph identify the equilibrium wage rate, the employment level, the opportunity cost and the economic rent.

Concept Introduction:

Economic Rent: the extra amount earned by a resource (e.g. land, capital, or labor) by the quality of its current use

Opportunity Cost: the next best alternative forgone when making a decision between choices

Equilibrium wage rate: the intersection of demand and supply of labor

Demand for labor: this is a concept that defines the amount of demand for labor that an economy or firm is willing to employ at a given point of time.

B

To determine

the demand for labor, new equilibrium wage rate, employment level, Economic rent and opportunity cost in case there is an increase in the price of a substitute resource.

Concept Introduction:

Economic Rent: the extra amount earned by a resource (e.g. land, capital, or labor) by the quality of its current use

Opportunity Cost: the next best alternative forgone when making a decision between choices

Equilibrium wage rate: the intersection of demand and supply of labor

Demand for labor: this is a concept that defines the amount of demand for labor that an economy or firm is willing to employ at a given point of time.

C

To determine

The effect on the demand for labor when demand for the final product decreases, the new equilibrium wage rate and employment level and to determine whether there is a change in the economic rent and opportunity cost

Concept Introduction:

Economic Rent: the extra amount earned by a resource (e.g. land, capital, or labor) by the quality of its current use

Opportunity Cost: the next best alternative forgone when making a decision between choices

Equilibrium wage rate: the intersection of demand and supply of labor

Demand for labor: this is a concept that defines the amount of demand for labor that an economy or firm is willing to employ at a given point of time.

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1. Economic rent The following graph shows a competitive labor market. (? 50 Labor Demand 40 Labor Supply Labor Supply Economic Rent Labor Demand 10 Opportunity Cost 2 4 6 10 QUANTITY OF LABOR (Billions of hours) Based on the graph, the total amount paid to workers in this market (that is, total labor earnings) is On the graph, use the green triangle (triangle symbols) to shade the portion of labor earnings that consists of economic rent. Then, use the purple quadrilateral (diamond symbols) to shade the portion of labor earnings that consists of opportunity cost. WAGE RATE (Dollars per hour)

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2. Graphing demand for labor and computing the optimal quantity Consider a company operating in a competitive market. The company sells units of output and receives a price of $30 per unit, and pays a daily market wage of $375 to each worker it employs. In the following table, complete the column for the value of the marginal product of labor (VMPL) at each quantity of workers. Marginal Product of Labor (Units of output) Value of the Marginal Product of Labor (Dollars) Labor (Number of workers) 0 1 2 3 4 5 Output (Units of output) 0 16 31 45 56 64 16 15 14 11 8 On the following graph, use the blue points (circle symbol) to plot the firm's labor demand curve. Then, use the orange line (square symbols) to show the wage rate. (Note: If you cannot place the wage rate at the level you want, move the two end points individually.) Hint: Remember to plot each point halfway between the two integers. For example, when the number of workers increases from 0 to 1, the value of the marginal product…