## Wednesday, January 11, 2017

### 2012 (Resource Costs) Labor, Multiple Choice

2012 Multiple Choice (Resource Costs) Labor
Labor Cheat Sheet Here.

Make a chart as these questions are almost always set up the same way.
Whatever chart you use do it the same way every time.
Understand that we hire at Profit max for labor which is where MRP=MRC, or as close as we can get.
So we would hire the 4th workers as she brings in \$50 (marginally) and we pay her \$40 in a wage,, this gives us a \$10 profit on her hire. We would not hire worker #5 as he only brings in \$25 and we would have to pay him \$40,, this hire would cost us \$15... We lose money on  the 5th hire.

What is the MPP??

Understand that this is the same formula for the MP,,
as the change in labor for all of these problems changes by one.

Answer - (A) The marginal product per dollar spent on labor is equal to the marginal product per dollar spent on capital.

Least-Cost Post here.

Answer - (B) Horizontal and downward sloping

Understand that this is a recognition problem, if it is a
perfectly competitive market, Demand curve is the MRDARP curve
and
the Firm's Labor demand curve is the MRP curve and it is downward sloping.

Answer - (D) MRP = MFC

Understand that sometimes the AP uses Marginal Factor Cost and sometimes Marginal Resource Cost as the wage rate.
same same