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Page 163 1a.
b. In a perfectly competitive labour market, the farmer’s marginal resource cost is the hourly wage of $15. The profit-maximizing employment rule states that profit is maximized at the employment level where marginal revenue product and marginal resource cost are equal. Comparing marginal revenue product with this marginal resource cost, the farmer will hire 3 workers. Between 2 and 3 workers, marginal revenue product, at $18, exceeds the marginal resource cost of $15, whereas between 3 and 4 workers the marginal resource cost of $15 exceeds marginal revenue product, now at $12. c. d. With 10 000 identical employers in the labour market, each hires 3 workers at a wage of $15. So 30 000 [= (3 x 10 000)] workers are hired in the entire market. e. 2a. With an increase in product demand, the demand for unskilled labour used in the fruit-growing industry will also increase. b. Automated machinery likely represents a substitute resource for unskilled labour in this industry. The introduction of new automated techniques will therefore cause the demand for this labour to decrease. c. Because land and unskilled labour are complementary resources in the fruit-growing industry, a rise in land rents causes the demand for this labour to decrease. Page 169 1a. The Albertan carpenter is likely better paid. This is primarily due to regional disparities. b. The truck driver is likely better paid. This is primarily due to more unpleasant job conditions. c. The postal worker is likely better paid. This is primarily due to the fact that the postal worker is unionized while the courier company employee is probably not unionized. d. The warehouse clerk is likely better paid. This is primarily due to discrimination on the basis of gender. While restaurant jobs are dominated by low-paid female labour, warehouse clerks are usually men. e. The lawyer is likely better paid. This is primarily due to the greater amount of education required to be a lawyer. Page 173 1a. The oil spill decreases the demand for land in this region, causing rents to fall b. The gallery event increases the demand for this artist’s work, which raises her economic rent. c. The influx of European players increases the supply of talented hockey players, and reduces the economic rents received by those players already in North American leagues. d. Global warming reduces the supply of this country’s available land, which means land rents rise. 2a. The loan to the high-tech business will likely have the higher interest rate, because of the business’s greater credit risk. b. The five year loan will likely have the higher interest rate, due to its longer repayment period. c. The $10 000 loan will likely have the higher interest rate, since it is a smaller size. d. The personal loan will likely have the higher interest rate, because it is not secured with collateral assets. |