140 Chapter 3
marginal rate of technical perfect complements, I 06 value of average
substitution, 95 perfect substitutes, 105 product, 88
marginal revenue, 92 perfectly competitive value of marginal
Marshalls rules of firm, 87 product, 88
230 Chapter 5
H or i ow
ability bias, 223
value of a statistical
hedonic wage function, 2i'5
isoprot curve, 2H
differential, 203 reservation price, 206
. Suppose there are two types of jobs in
Chapter 05 - Compensating Wage Differentials
1.Suppose there are 100 workers in the economy in which all workers must choose to work
a risky or a safe job. Worker 1s reservation price for accepting the risky job is $1; worker
2s reservation pric
Chapter 04 - Labor Market Equilibrium
1. (a) What happens to wages and employment if the government imposes a payroll tax
on a monopsonist? Compare the response in the monopsonistic market to the
response that would have been observed in a compe
Chapter 03 - Labor Demand
1. Suppose there are two inputs in the production function, labor and capital, and these two
inputs are perfect substitutes. The existing technology permits 1 machine to do the work of
3 workers. The firm wants to produce 10
Final Examination (semester 2, 2013)
Consider the Heckscher-Ohlin type of specific factors model (we learned in class) where
there are two goods, C and F produced by three factors such as labor(L), land(T) and
capital (K). The land is
Midterm Examination (semester 2, 2009)
Which of the following statement is not correct?
a) Imports are defined as the purchase of goods and services from other countries.
b) Exports are defined as the sales of goods and services to
Firms hire workers because consumers want to
purchase a variety of goods and services.
Demand for workers is derived from the wants and
desires of consumers.
Central questions: how many workers are hired and what
Labor Economics (Autumn 2014)
Given the firms production function, the marginal product of labor is
Thus, the value of marginal product of labor is
VMPL P MPL = 12 10 L 2 =
On the other hand, the firms total
Labor Economics (Autumn 2014)
(Due on 10/17)
1. Suppose that all markets are competitive; the product price is $12 per unit; the wage is
$6 per worker; the firms production function is given by y =20L1/2 , where L is the
level of employment; an
Why study Labor
Labor economics studies how labor markets work.
Labor economics helps us understand and address
many social and economic problems facing modern
Basics of the Labor Market
Participants are assigned
Labor Economics I (Autumn 2014)
We can write the Watsons utility maximization problem as
maximizeC , L U (C , L) = 3C1/2 L1/2
C + wL = 24 w + 240.
The marginal rate of substitution between consumption and leisure is
3 1/2 1/2
Labor Market Equilibrium
Labor market equilibrium coordinates the desires
of firms and workers, determining the wage and
employment observed in the labor market.
o Competitive market: many sellers and buyers
o Monopsony: o
People bring into the labor market a unique set
of abilities and acquired skills known as human
Workers add to their stock of human capital
throughout their lives, especially via job
experience and education.
The labor market is not characterized by a
single wage: workers differ and jobs differ.
Compensating wage differentials arise to
compensate workers for nonwage
characteristics of the job.
Workers have di