Pretend for a moment you are the instructor developing this course. Write 2 short answer questions for an exam over this chapter that you believe cover the most important points in the chapter. Post both questions on your blog. Give an example of a great answer and an okay answer to each question. (Be sure to differentiate between the two responses. Don’t write simple definition or list questions.)
Your overall goal here is to first choose questions that highlight the important part of the chapter – which means you have to decide what that is. The second goal is to be sure you know the difference between a C answer and an A answer. An A answer will talk about the theory covered in the chapter and will include some analysis of the concepts. A answers are almost always longish.
This blog post gets called out as both the favorite and the least favorite topic more than any other topic – favorites win by a small margin, so I leave it in. Hope you are one of the favoriters.
- Explain the connection between how a firm’s value of marginal product is related to its demand for labor?
Profit is equal to total revenue minus total cost. So the profit from an additional worker is the worker’s productivity and contribution to revenue, minus the workers wage. In order to find out a workers contribution to revenue you should convert the marginal product of labor into the value of the marginal product. This will be measured in dollars. The value of marginal product is an input times the price of the output. This is the value a firm gets from hiring an additional unit of a factor of production. Consider that the marginal product of labor diminishes as the number of workers rises. When graphed you will see that a competitive (profit maximizing) firm will hire workers up to the point at which the value of the marginal product of labor equals the wage. Remember that competitive firms are price takers and wage takers in the market.
2. How does a competitive firm decide how many workers to hire?
In relation to the last answer, the number of workers hired will relate to the wage, price of the product, and the value of the marginal product of labor. If you graph out the production function you will see the law of diminishing returns as you hire more workers. Determine your marginal product of labor and then convert that to the value of the marginal product. Graph that along with your market wage, and the value of marginal product (demand for labor), and you will have your answer to maximize profit.
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