Question

1. A high demand for labor in one industry will:

a. decrease the number of hours worked in that industry.

b. cause a shortage of workers.

c. cause a surplus of workers.

d. attract workers from another industry.

2. The increase in a firm's revenues created by hiring an additional worker is called:
a. marginal revenue of labor.
b. marginal product.
c. marginal revenue.
d. marginal product of labor.

Answer 1

1) Here, option (d) is the correct answer

A high demand for labour in one industry would attract the labourers from other industry. As per the law of demand and supply, an increase in the demand would cause an increase in the supply in an economy which is called as the ‘invisible hand’ in an economy as per Adam Smith who is called as the father of modern economics. With an increase in demand for labour in an industry, the workers of such an industry is expected to get an increased wage as it is essential for that industry to have minimal number of employees to implement the industrial production activities. Thus, this would attract the labourers from other industries due to increase in the wages and thus would cause the shift of labourers from one industry to another industry

2) Here, option (a) is the correct answer

The additional revenue that the firm is able to create by hiring an additional labour is called as the marginal revenue of labour. This means that the firm would be able to generate additional revenue by hiring an additional employee which would be able to overcome the effects of additional expenses that would be undertaken by the firm in hiring an employee

· The marginal product of labour is the change in the output that results from employing an additional unit of labour. It depends on the amount of physical capital and labour that is already in use.

· The marginal revenue is referred to as the additional revenue that is generated by producing an additional unit of a product or service. The input can be anything which need not be the labour force alone.

· The marginal product is the change in output that is resulting from employing an additional unit of input. The major difference is that the input need not be labour force alone.