1. ECONOMICS: Principles and Applications 3e HALL & LIEBERMAN © 2005 Thomson Business and Professional Publishing The Labor Market

2. Figure 1 Product and Factor Markets HouseholdsFirms S D Demand for Goods and Services Supply of Goods and Services Demand for Resources Supply of Resources Factor Markets Product Markets S D

3. Table 1 Data for Spotless Car Wash (Perfectly Competitive Product and Labor Markets)

4. Figure 2 The Profit-Maximizing Employment Level MRP 60 MFC = Wage 2 Number of Workers Dollars $200 1345678 150 50 100 1.Hiring another worker adds more to revenue... 2.than it adds to cost... 3.until profits are maximized at five workers.

5. Figure 3 The Firm’s Labor Demand Curve n1n1 B A n2n2 W2W2 W1W1 W2W2 W1W1 Number of Workers Dollars MRP Firm's Labor Demand Curve

6. Figure 4 The Employment Decision with Several Variable Inputs n1n1 B A Firm' Labor Demand Curve n2n2 W2W2 W1W1 W2W2 W1W1 n3n3 C MRP 1 MRP 2 Number of Workers Dollars

7. Figure 5 The Market Demand for Labor 100 ldld 80 $12 10 40503090 ldld ldld Number of Workers Hourly Wage Firm AFirm BFirm C Hourly Wage if we add the number of workers demanded by Firm A... At any wage rate (such as $10)... and by Firms B, C, and all other firms as well...

8. Figure 5 The Market Demand For Labor LDLD Hourly Wage Number of Workers Labor Market $12 10 we get the market quantity of labor demanded at that wage rate. N2 = 80 + 40 + 30 + ….N1 = 100 + 50 + 90 + …

9. Figure 6 A Shift in the Labor Demand Curve n1n1 Number of Workers Hourly Wage BA n2n2 $10 B Typical FirmLabor Market A N1N1 N2N2 Hourly Wage Number of Workers

10. Figure 7 Introducing a New Input Number of Workers Hourly Wage More of a Substitutable Input More of a Complementary Input

11. Table 2 Shifts in the Labor Demand Curve

12. Figure 8 The Market Labor Supply Curve 1,000 1,2001,800 $12 10 $10 D C (b) Number of Workers Hourly Wage Hourly Wage (a) Number of Workers

13. Table 3 Labor Force Participation Rates (Percent of those Over 16 Working or Looking for Work)

14. Table 4 Shifts in the Labor Supply Curve

15. Figure 9 The Long-Run Labor Supply Curve 30,00060,00090,000 Number of Workers Hourly Wage B 25 $40 A C 2.When the wage rate rises to $40, employment rises to 60,000 in the short run.. 3.In the long run, the wage rate of $40 attracts new entrants and employment rises to 90,000. 4.The long-run labor supply curve connects points A and C. 1.Initially, the wage is $25 and 30,000 people supply labor.

16. Figure 10 Labor Market Equilibrium 1.The market labor supply and labor demand curves determine the equilibrium wage rate and equilibrium employment. LSLS 2,0003,0004,500 16 20 $24 LDLD W 10 $20 Number of Paralegals Hourly Wage Dollars (a) Labor Market(b) Typical Firm ldld 3.hires up to where its MRP curve crosses the $20 wage line. 2.Each law firm, taking the market wage of $20 as a given, Number of Paralegals

17. Figure 11 A Change in Labor Demand 5,000 8,000 12,000 30 $40 a b c W1W1 W3W3 W2W2 B A C 5080120 20 30 $40 20 (a)(b) Number of Workers Hourly Wage Number of Workers Labor MarketTypical Firm Dollars

18. Figure 12 The Market for Finance Professors (1995–2002) 66,900 $102,400 B A N1N1 N2N2 Number of New Finance Professors Annual Wage

19. Figure 13 The Market for College-Educated Labor 1431 31,732 $40,479 B Millions of Workers Median Annual Wage 2001 dollars A Between 1978 and 2000, the labor supply curve shifted rightward... but the rightward shift in the labor demand curve was even greater. As a result, the average wage in 2001 rose to $40,479. In 1978, the average wage rate (in 2001 dollars) for college- educated labor was $31,732.

20. Figure A.1 A Monopsonist’s Employment Decision