平狄克微观经济学第六版课后答案

CHAPTER 14

MARKETS FOR FACTOR INPUTS

The following two chapters examine the markets for labor and capital. Although the discussion in this chapter is general, most of the examples refer to labor as the only variable input to production, with the exception of Example 14.1, which discusses “The Demand for Jet Fuel” by airlines. Labor demand and supply are discussed in the first section, and the competitive factor market equilibrium and economic rent are discussed in the second section. Section 14.3 explores the factor market structure for the case where the buyer has monopsony power, and section 14.4 explores the case of monopoly power on the part of the seller of the factor.

An understanding of this chapter relies on concepts from Chapters 4 through 8 and 10. If you have just covered Chapters 11-13, you might begin by reviewing marginal product, marginal revenue, and cost minimization. You should then discuss marginal revenue product and the profit-maximizing condition MRPL = w. Explain why we are only interested in the portion of the MP curve below the average product curve (the downward-sloping portion). The derivation of the firm’s demand curve for labor is straightforward when labor is the only factor, but becomes more complicated when there are several variable inputs. In particular, you might explain why the MRPL curve shifts as the firm substitutes one input for another in production in response to a price change by noting that the MRPL curve is drawn for a fixed level of the other variable input.

When presenting the market labor demand curve, explain that since the input prices change as more inputs are demanded, the market demand curve is not simply the summation of individual demand curves. You can extend the presentation of price elasticity of input demand (see Example 14.1) by discussing the conditions leading to price sensitivity. Elasticity is greater (1) when the elasticity of demand for the product is higher, (2) when it is easy to substitute one input for another, and (3) when the elasticity of supply is higher for other inputs. Elasticity of supply, which was discussed in Chapter 2, is reintroduced in Example 14.2. You should also distinguish between short-run and long-run elasticity (see Figure 14.6).

If you have already covered substitution and income effects, the students will be ready for the derivation of the backward-bending supply curve for labor. Although Figure 14.9 is a straightforward application of these tools, students are often confused by the plotting of income against leisure. Point out that this is just another type of utility maximization problem where the two goods are leisure and income. Income can be thought of as the consumption of goods other than leisure, in that more income buys more goods. You can also implicitly assume that the price of other goods is $1 and the price of leisure is the wage. The supply of labor curve is derived by changing the wage and finding the new level of hours worked. An individual’s supply curve of labor is backward bending only when the income effect dominates the substitution effect and leisure is a normal good. Show typical supply curves for each group in Table 14.2. For an experimental study of the labor-leisure trade-off see Battalio, Green, and Kagel, “Income-Leisure Tradeoff of Animal Workers,” American Economic Review (September 1981).

Section 14.2 brings together labor demand and supply for both competitive and monopolistic Although economic rent was presented in Chapter 8, it is reintroduced with more detail here. In Section 14.3, carefully explain why the marginal expenditure curve is above the average expenditure curve for a monopsonist (see Figure 14.14). You can discuss how a monopsonist would price discriminate, e.g., pay a different wage rate to each employee. With perfect price discrimination, the marginal revenue expenditure curve would coincide with the average expenditure curve. Although monopsony exists in some markets, the exercise of monopsony power is rare because of factor mobility. However, the employment of athletes by the owners of professional teams provides a good example (see Example 14.4 “Monopsony Power in the Market for Baseball Players”). On this same topic, see Sommers and Quinton, “Pay and Performance in Major League Baseball: The Case of the First Family of Free Agents,” Journal of Human Resources (Summer 1982). Section 14.4 discusses the case of unions to explore monopoly power on the part of the seller of the input.