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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

If firms are competitive and profit-maximizing, the demand curve for labor is determined by

a. the opportunity cost of workers’ time.

b. the value of the marginal product of labor.

c. offsetting income and substitution effects.

d. the value of the marginal product of capital.

To determine
Determining factor of labor demand curve in a profit maximizing firm.

Explanation

Option (b):

The wage of the labor is determined by the level of marginal productivity of labor. The demand (Demand curve) for labor is determined by the wage of the labor. Thus, the demand for labor is determined by the marginal productivity of labor. Hence, option “b” is correct.

Option (a):

The opportunity cost of worker’s time is used for the decision making process to allocate the time to alternative works...

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