The Figure Given Below Represents Equilibrium in the Labor Market

question 60

Multiple Choice

The figure given below represents equilibrium in the labor market with the demand and supply curves of labor.Figure 14.6
In the figure,
D = MRP implies demand for labor = Marginal Revenue Product
MFC represents Marginal Factor Cost curve
S represents the supply curve of labor

-The demand for capital, as an input in production, will decrease if:

• A)labor and capital are substitutes in production and the supply of labor decreases.
• B)the demand for the final good it produces increases.
• C)capital becomes more productive.
• D)the price of capital decreases.
• E)labor and capital are substitutes in production and the wage rate declines.

Comprehend the principles of supply and demand in determining wages and prices in competitive markets.

Grasp the economic rationale behind hiring or using more or less of a factor of production based on its MRP versus its cost.

Recognize the role of elasticity in supply and demand in determining the allocation and pricing of resources.

Understand the concept of pure rent and its relationship to factors of production in fixed supply.

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