ap micro unit 5

factor market

market in which firms purchase the factors of production (resources) from households (businesses)

businesses

In a factor market, the _________ are demand

households

In a factor market, the _________ are supply

Marginal revenue product

the change in total revenue associated with one additional unit of input

MRP

MR x MP

Marginal cost of labor

the cost to the firm of hiring one more worker

MCL

Wage/MP

MRP

In a Factor market, the firm's demand for labor is the ________ because it is the maximum that the firm is willing to pay for that quantity of labor

MRP > Wage

In a factor market, you only hire workers where ____________

Value of Marginal Product

MP x Price

MR

If the firm is selling to a perfectly competitive market then Price =

derived demand

business demand that ultimately comes from the demand for consumer goods (increase in demand for housers = increase in demand for carpenters)

economic rent

any amount above the minimum needed to bring a resource into use

wage - opportunity cost

economic rent

equilibirum

In the labor market, the ____________ is the intersection of supply/demand and established the wage paid

unemployment

When at equilibrium, there is no ______________

minimum

In a labor market, the _______ wage goes above the equilibrium wage

unemployment

The gap between the quantity of workers at the equilibrium wage and the quantity of workers at the minimum wage

Perfectly Competitive Factor Market

A large number of buyers in the factor market - Each firm is acquiring a very small amount of resources compared to the entire market - competing for labor, workers have identical skills

wage takers

In a Perfectly Competitive Factor Market, the firms are ________ ______________

marginal factor cost

marginal resource cost is aka (cost of hiring an additional worker)

wage

In perfect competition, MRC =

any number

In perfect competiiton, the firm can hire ___ _________ of workers at the equilibrium wage (perfectly elastic)

marginal revenue product

the change in total revenue associated with one additional worker

MRP

MP x MR

MP x P

value of marginal product

MRP

_______ is the maximum wage a firm is willing to pay at x number of workers, also the demand for labor

increasing

Always hire if MRP is ___________

MRP = MRC

Profit Maximizing in perfect comp

MRP > MRC

hire as long as

MRP

A change in the market wage moves the firm's MRC, this changes ________ of last worker in market graph

profit maximizing quantity

A change in the firm's MRP shifts the firm's demand, this changes the market's _______ ________ _________

Least Cost Combination

A combination of two or more resources in such a way that the resource cost of producing a given level of output is a minimum

Profit Maximizing Combination

Marginal Revenue Product of Labor / Price of Labor = Marginal Revenue Product of Capital / Price of Capital = 1

monopsony

a market structure in which there is only a single buyer of labor (employer), there are no alternative employers, and high barriers to entry

market

In a monopsony, the firm's supply equals the _______ supply

MRP = MRC

hire where

lower wages and lower quantity

Compared to a competitive market, monopsonies pay ________ (this creates deadweight loss)

minimum wage

In a monopsony, the _______ _______ is the intersection between supply and demand.

MRC

Minimum wage makes _________ horizontal until it hits supply