PART I: SHORT RESPONSE

Directions: Please provide detailed and elaborate responses to the following questions.  Your responses should be a minimum of 1 to 2 paragraphs and should include examples from the reading assignments or personal experience, if possible.

1. As output rises, which MRP curve declines more quickly—the MRP of the perfect competitor or the MRP of the imperfect competitor? Explain your answer.

2. How is the demand for a resource affected by (a) changes in the demand for the final product and (b) productivity changes?

3. Using the substitution and output effects, explain how a decline in the price of resource A might cause an increase in the demand for substitute resource B.

4. If automatic dishwashers and human dishwashers can be substituted for one another, and if the wage rate for dishwashers rises, what happens to the demand for automatic dishwashers according to (a) the substitution effect and (b) the output effect?

   PART II: PRACTICAL APPLICATION

   
   

   Directions: Please complete the following problems and show your work, if applicable.

   
   

   (a) Fill in the below Table. 

   
   

   Units of Labor	Output	Marginal Physical Product	Price	Total Revenue Product	Marginal Revenue Product
   1	22		$20
   2	43		19
   3	63		18
   4	81		17
   5	96		16
   6	109		15
   7	119		14
   8	127		13

   
   

   (b) Is the firm a perfect or an imperfect competitor? Explain. 

   
   

   (c) If the wage rate were $220, how many workers would be hired? How much would the total wage bill come to?

   
   

   (d) If the wage rate were $100, how many workers would be hired? How much would the total wage bill come to?