Labor Market Dynamics and Capital Use

The video tutorial explains how Epic Eats, a perfectly competitive producer, operates in a competitive labor market. It guides viewers through drawing side-by-side graphs for the labor market and Epic Eats, illustrating concepts like marginal factor cost (MFC) and marginal revenue product (MRP). The tutorial also explores the impact of a price increase on wages and labor demand, and demonstrates how to calculate the wage rate using cost minimization principles.

What type of market does Epic Eats operate in?

• Monopolistic market

• Perfectly competitive market

• Monopoly market

• Oligopolistic market

In a perfectly competitive labor market, what happens to labor demand as wages decrease?

• Labor demand remains constant

• Labor demand decreases

• Labor demand becomes unpredictable

• Labor demand increases

What does the equilibrium wage in the labor market represent?

• The wage at which labor supply equals labor demand

• The highest wage a firm can pay

• The average wage in the market

• The lowest wage a firm can pay

What is the marginal factor cost (MFC) for Epic Eats?

• The market wage rate

• The average cost of production

• The cost of capital

• The cost of raw materials

How does Epic Eats decide the number of workers to hire?

• By hiring until the average revenue equals average cost

• By hiring a fixed number of workers

• By hiring until the total revenue equals total cost

• By hiring until the marginal revenue product equals the marginal factor cost

In the short run, how does a price increase affect the wage paid by Epic Eats?

• The wage decreases

• The wage increases

• The wage remains the same

• The wage becomes variable

What happens to the number of workers hired by Epic Eats after a price increase?

• The number of workers becomes unpredictable

• The number of workers increases

• The number of workers remains the same

• The number of workers decreases

What is the marginal product of the last unit of capital used by Epic Eats?

• 2,000 units

• 3,000 units

• 4,000 units

• 5,000 units

If the rental rate of capital is $400, what is the calculated wage rate for labor?

• $500

• $300

• $200

• $400

How does Epic Eats minimize costs when using capital and labor?

• By equalizing the total product of both

• By maximizing the total product

• By minimizing the total cost

• By equalizing the marginal product per dollar spent on both