Answer:
a) Derived demand refers to the demand for a resource or factor of production, such as labor, which is not directly demanded for its own sake but is derived from the demand for the final goods or services that the resource helps produce. In other words, the demand for labor is derived from the demand for the products or services that labor helps create. For example, if there is an increase in the demand for automobiles, it will lead to an increased demand for labor in the automotive industry to manufacture those cars.
b) Several factors can affect the wage rate paid to workers:
1. Supply and demand: The basic principle of supply and demand applies to the labor market as well. If there is a high demand for workers relative to the supply, wages tend to increase. Conversely, if there is an oversupply of workers relative to the demand, wages may decrease.
2. Skills and qualifications: The level of skills, qualifications, and experience required for a particular job can influence the wage rate. Jobs that require specialized skills or expertise often command higher wages.
3. Productivity: The productivity of workers plays a role in determining wages. Highly productive workers who can generate more output in a given time period are likely to receive higher wages.
4. Bargaining power: The bargaining power of workers or labor unions can impact the wage rate. Strong unions or collective bargaining can negotiate higher wages for their members.
5. Market competition: The competitive nature of the industry or market can influence wages. In highly competitive industries, firms may need to offer higher wages to attract and retain skilled workers.
c) A profit-maximizing firm's hiring decision involves weighing the costs and benefits of employing additional workers. The firm will continue to hire more workers as long as the marginal benefit (the additional output generated by each additional worker) exceeds the marginal cost (the additional cost incurred by hiring an additional worker).
The firm will hire workers up to the point where the marginal cost of hiring an additional worker equals the marginal benefit, as this is the point where hiring more workers no longer adds value to the firm. At this point, the firm achieves its optimal level of employment, maximizing its profit by balancing labor costs and productivity.