1.
 Explain what the value of marginal product is?
2.
 Firms hire to the point where what = what?
3.
Labor
Output
MPL
VMPL
Wage
Marginal
Profit
0
0
---
---
---
---
1
100
$300
$150
2
220
$150
3
350
$150
4
400
$150
5
380
$150
What is the price of the good? What is the Marginal Product of labor of the third worker?
What is the marginal profit of the 5th worker?
4.
Labor
Output
MPL
VMPL
Wage
Marginal
Profit
0
0
---
---
---
---
1
100
$300
$150
2
220
$150
3
350
$150
4
400
$150
5
380
$150
 How many people would this firm hire?
5.
 Draw what would happen for the market for apple pickers if
the price of apples went up? (draw the graph for both
market of apple pickers and the VMP graph)
6.
 How does elasticity of a product affect the labor market for
the same product?
7.
 Describe the difference between a diminishing marginal
product of labor and a negative marginal product of labor.
Why would a profit-maximizing firm always choose to
operate where the marginal product of labor is decreasing
(but not negative)?
8
 A union brings a higher wage to a factory, what happens to
the level of employment of that factory? Why?
9.
 Many teachers have advanced educational degrees, yet they
have lower average earnings that other individuals with
similar educational levels. A potential explanation for the
differences in earnings is what?
10.
 What do minimum wage laws do to the market for labor?
11.
 A nurse who specializes in cleaning bed pans is typically paid
a higher wage than a nurse who does patient paperwork. This
can be partially explained by what?
12.
 Mr. Wicker, a teacher, is considering where he will work.
Two recruiters show up at his college in search of summer
teachers. Recruiter A is looking for workers to teach in a
disaster relief agency. Recruiter B is looking for a teacher to
teach near the entrance to a famous national park.
Mr. Wicker is carefully considering the options that each recruiter presents. On the basis of
knowledge obtained in his economics class, Mr. Wicker concludes what about the
relationship between utility and pay of these two options?
13
 What is human capital? Can you give me an example?
14.
 What is an example of technology that increases human
efficiency? What is an example of human replacing
technology? What does each do to the demand for labor?
15.
 Assume that the labor market for barbers is competitive and
that it is differentiated into two groups: barbers who are bald
(or going bald) and those who have a full head of hair.
Assume that the barbers in this market have identical haircutting ability, regardless of whether they are bald or not.
Currently the equilibrium wage in the bald barber market is
lower than that in the nonbald market. Further assume that
the market for haircuts is competitive.
If consumers do not discriminate between bald barbers
and barbers with hair, then what shops are the most
profitable?
16.
 Assume that the labor market for barbers is competitive and
that it is differentiated into two groups: barbers who are bald
(or going bald) and those who have a full head of hair.
Assume that the barbers in this market have identical haircutting ability, regardless of whether they are bald or not.
Currently the equilibrium wage in the bald barber market is
lower than that in the nonbald market. Further assume that
the market for haircuts is competitive.
If consumers do not discriminate between bald
barbers and barbers with hair, then what happens
to wages of each barber type?
17.
 What is an example of discrimination in the labor market?
Please also offer an explanation why.
18.
 What are the three main intellectual models for
redistributing income, per the book?
19.
 What is the poverty rate (the idea, not the actual number)?
20.
 What would have to change in a country to adjust the
poverty line?
21.
 What would be a good formula for a negative income tax?
22.
 Does the market distribute efficiently or equally? Why?
23
 Assume that the government proposes a negative income tax
that calculates taxes owed by the following formula,
 Taxes Owed = (1/3 Income) - $10,000.
 Compute the tax that would be owed given each level of
income.
$120,000
$90,000
$60,000
$30,000
$0