Unit 5: Factor Markets

Unit 5 Review:  Factor Markets 

1.  Factor Market

2. Total Revenue

3. Total Profit

4. Marginal product of labor 

5. Marginal Revenue Product 

6. Total cst

7. Fixed cost

8. Variable cost 

9. Marginal factor cost

10. Profit max point in factor _________ =___________

11. Show side by side market and firm curves for  a perfectly competitive labor (or another factor) market.  Label the following

1.  Market supply and demand 

2. Market wage and quantity of labor (equilibrium wage and quantity)

3. Firm MFC, wage rate, MRP, and Quantity of labor 

      12.   Factors that determine the Demand for labor:

      13.  Show the impact on each of the following on a perfectly competitive labor market on side by side market and firm curves For each, show     Market S and D Curve, Market Wage and QL, Firm MFC, Firm W and Firm QL.

1.  Increased derived demand for labor

2. Decreased worker safety standards

3. Increased immigration

4. Increased productivity of all workers  

5. Increased productivity for just one firm

14.  Monopsony 

15.  Show side by side market and firm curves for a monopsonistic labor (or another factor) market.  Label the following

4.  Market supply and demand 

5. Market wage and quantity of labor (equilibrium wage and quantity)

6. Firm MFC, wage rate, MRP, and Quantity of labor 

Unit 5 FRQs

5.1 Production Function 

5.2 Labor Markets:  Perfect Competition 

5.3 Labor V Capital 

Epic Eats is a perfectly competitive, profit maximizing producer of stuffed sandwiches, and hires workers in a perfectly competitive labor market.

1.  Draw side-by-side graphs for the labor market and for Epic Eats and show each of the following

 (i) The market wage, labeled Wm, and the quantity of workers hired in the market labeled Lm

(ii)The marginal factor cost curve, labeled MFC

(iii) The marginal revenue product curve, labeled MRP1

(iv)  The wages paid by the firm, labeled Wf and the quantity of workers hired by the firm, labeled Lf

   (b)Assume that there is an increase in Price of Epic Eats stuffed sandwiches.

  (i) In the short run, will the wages paid by Epic Eats be higher than, lower than, or equal to Wf?  Explain.

(ii)  In the short run, what will happen to the number of workers hired by Epic Eats?  Explain.

( C ) Epic Eats uses labor and capital in the production of sandwiches.  The marginal product of the last unit of capital used is 4000 units and the marginal product of the last unit of labor used is 3000 units.  If Epic Eats minimizes costs and the rental rate of capital is $400, what is the wage rate?

5.4  Monopsony

Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to “Calculate,” you must show how you arrived at your final answer.