Unit 5 Micro

Factor markets

Factors are resources
In the factor markets, producers are the buyers (they purchase resources) and the households are the sellers (they sell their resources such as land) add more

Marginal revenue product (MRP)

The additional revenue that a worker brings because they are there (MR x MP)

Marginal Factor Cost

The additional cost of hiring a worker (wage a worker makes)

Where does a firm maximize its profits for resources?

MRP=MFC

Monospony

If a monopsony exists, the Supply and MFC curves are upward sloping
Occurs when there is one buyer of labor

n

A worker’s wage is determined by the equilibrium in a supply and demand graph
A firm’s MRP decreases and is the same as the Demand for Labor as with increases in the quantity of labor causes MRP to decrease
MFC is at the wage set by the labor market’s equilibrium price (wage) Wages are constant as the firm is a wage taker and has no control over

Minimum wage

If minimum wage is in effect, wages will increase, but the quantity of workers employed will decrease
This causes a surplus of workers - unemployed people