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Problem Set 12

# Problem Set 12 - Econ 221 Key to Practice Problem Set...

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Econ 221 Key to Practice Problem Set 12 (Chapter 16) 1. The demand for labor is a derived demand. Explain the meaning of the term "derived demand". Explain how the market for opticians is affected as a result of the development of laser technology which reduces the demand for glasses and contact lenses. In your explanation be sure to show the connection between the market for glasses and contact lenses and the market for opticians. A derived demand is the demand for a factor of production that is derived from the demand for the good or service the factor produces. Opticians are trained professionals who fit people with glasses and contact lenses. If the demand for glasses and contact lenses falls because more customers switch to lasik eye correction, the demand for opticians, which derives from the demand for glasses and contact lenses, will also fall. 2. The firm represented in the table below participates in a perfectly competitive market for its product (output) as well as for labor. 1 Quantity of Labor 2 Total Output 3 Marginal Product of Labor 4 Product Price (\$) 5 Marginal Revenue Product of Labor (\$) 6 Wage Rate (MRC) per day (\$) 0 0 --- --- --- --- 1 10 10 \$10 100 \$55 2 19 9 \$10 90 \$55 3 27 8 \$10 80 \$55 4 34 7 \$10 70 \$55 5 40 6 \$10 60 \$55 6 45 5 \$10 50 \$55 7 49 4 \$10 40 \$55 8 52 3 \$10 30 \$55 2a. Complete the table above and use the table to answer to following questions. b. If you want to graph the Total Product of Labor curve, which columns of data in the table above would you use? What variable will be measured on the horizontal axis? On the vertical axis?

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