Lab
The Competitive Hiring Graph
Each graph shows one firm that hires in a perfectly competitive labor market. Its marginal revenue product slopes down, and the market wage is a horizontal line, which is also the firm's marginal factor cost. Title both axes and name both lines first. Then decide what the situation changes, move it, and drag the round point to the number of workers the firm hires. On paper, draw the labor market beside the firm: the market wage is set where market demand and market supply for labor cross.
Challenges
- In each situation, did the wage line move or did MRP? Say which, and why.
- Draw the labor market beside the firm on paper for the two situations that change the market wage: which market curve moved, and which way?
- Why does the firm stop hiring exactly where MRP meets the wage, and not one worker before or after?