12.1 What
is the significance of resource pricing? Explain how the factors
determining resource demand differ from those determining product
demand. Explain the meaning and significance of the fact that the demand
for a resource is a derived demand. Why do resource demand curves slope downward? LOI
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12.2 At
die bottom of the page, complete the labor demand table for a firm that
is hiring labor competitively and selling its product in a competitive
market. L02a. How many workers will the firm hire if
the market wage rate is $27.95? $19.95? Explain why the firm will not
hire a larger or smaller number of units of labor at each of these wage
rates.b. Show in schedule form and graphically the labor demand curve of this firm.c.
Now again determine the firm’s demand curve for labor, assuming that it
is selling in an imperfectly competitive market and that, although it
can sell 17 units at $2.20 per unit, it must lower product price by 5
cents in order to sell the marginal product of each successive labor
unit. Compare this demand curve with that derived in question 2b.Which curve is more elastic? Explain.
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12.3 In
2009 General Motors (GM) announced that it would reduce employment by
21,000 workers. What does this decision reveal about how GM viewed its
marginal revenue product (MRP) and marginal resource cost (MRC)? Why
didn’t GM reduce employment by more than 21,000 workers? By fewer than
21,000 workers? LO3 ...
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12.4
What
factors determine the elasticity of resource demand? What effect will
each of the following have on the elasticity or the location of the
demand for resource C, which is being used to produce commodity X? Where
there is any uncertainty as to the outcome, specify the causes of that
uncertainty. L04a. An increase in the demand for product X.b. An
increase in the price of substitute resource D.c. An increase in the
number of resources substitutable for C in producing X.d. A
technological improvement in the capital equipment with which resource C
is combined.e. A fall in the price of complementary resource E.f.
A decline in the elasticity of demand for product X due to a decline in
the competitiveness of product market X.
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12.5
Suppose
the productivity of capital and labor are as shown in the accompanying
table. The output of these resources sells in a purely competitive
market for $1 per unit. Both capital and labor are hired under purely
competitive conditions at $3 and $1, respectively....a. What is the
least‐cost combination of labor and capital the firm should employ in
producing 80 units of output? Explain.
b.
What is the profit‐maximizing combination of labor and capital the firm
should use? Explain. What is the resulting level of output? What is the
economic profit? Is this the least costly way of producing the
profit‐maximizing output?
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12.6 In each of the following four case's, MRPL and MRPC refer to the marginal revenue products of labor and capital, respectively, and PL and PC
refer to their prices. Indicate in each case whether the conditions are
consistent with maximum profits for the firm. If not, state which
resource(s) should be used in larger amounts and which resource(s)
should be used in smaller amounts. L05a. MRPL= $8; PL= $4; MRPC = $8; PC = $4b. MRPL = $10; PL = $12; MRPC = $14; PC= $9c. MRPL = $6; PL = $6; MRPC = $12; PC = $12d. MRPL = $22; PL = $26; MRPC= $16; PC = $19
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12.7 Florida
citrus growers say that the recent crackdown on illegal immigration is
increasing the market wage rates necessary to get their oranges picked.
Some are turning to $100,000 to $300,000 mechanical harvesters known as
“trunk, shake, and catch” pickers, which vigorously shake oranges from
the trees. If widely adopted, what will be the effect on the demand for
human orange pickers? What does that imply about the relative strengths
of the substitution and output effects? L05
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12.8 LAST WORD
Explain the economics of the substitution of ATMs for human tellers.
Some banks are beginning to assess transaction fees when customers use
human tellers rather than ATMs. What are these banks trying to
accomplish?
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