AP Microeconomics Unit 3

Marginal Revenue Product

The additional revenue generated from employing one more unit of a factor of production, such as labor. It is calculated by multiplying the marginal product of the input by the price of the output.

Derived Demand

The demand of a resource product is directly related to what the resource can be used for and the demand for those product.

Monpsonist

Single firm hiring in the area

Marginal Resource Cost

Amount each additional unit of a resource adds to the firms total cost.

What could cause a change in quantity demand for labor?

Change in supply of labor wage rate.

What could cause a change in the demand of labor

Change in MRP, productivity, product price, complementary goods, and substitute goods.

What is meant for real wages

Normal wages adjusted for inflation

What are possible reasons for the decline in union memberships

2nd employment, no history of union, etc

What are the criticisms of the minimum wage?

Raises MRC which increases unemployment

What are criticisms of industrial regulation

creates inefficiencies

What are criticisms of social regulation

side effects, MC is greater than MB

What are the positives and negatives of unions

Loyalty to company, Veteran workers more likely to train newer workers, and less worker turnover.

What is the equation for elasticity of labor? What can you do with the findings

% change of quantity demand of labor / % change of wage rate

What are characteristics of a perfectly competitive labor market

Many firms hiring

What would be an example of derived demand

Complementary goods and labor wages

How can productivity in the workforce be changed

change in tech, training, etc

How do monopsonist and perfectly competitive labor markets demand curves differ in shape

Monopsonist is a downward sloping MRP

How can MRP and MRC be used to determine if an employer has maximized their resources?

Hire workers until MRP=MRC to maximize