Factor Market Structures unit 5 micro

How many workers and employers are present in a Perfectly Competitive Labor Market

Infinite number of workers and employers

Barriers to entry and exit in a Perfectly Competitive Labor Market

Free entry and exit (no geographic barriers)

In a Perfectly Competitive Labor Market

Market will dictate the wage rate that firms will have to pay (horizontal line) equal to Marginal Resource Cost (or Marginal Factor Cost of Labor)

Monopsonists

Will hire labor up to the point where the marginal factor cost of labor is equal to the marginal revenue product of labor, then come down to supply curve to determine wage.

Where does a product market produce

where MC = MR

Product Market: Perfect Competition

Market determines demand

Product Market: Monopoly

MR curve is below the demand curve

Where does a labor market hire

where Marginal Revenue Product (MRP) = Marginal Factor Cost (MFC)

Labor Market: Perfect Competition

Market determines supply (wage)

Labor Market: Monopsony

Marginal Factor Cost (MFC) curve is above the supply curve