marginal revenue product (mrp)

the additional revenue generated by employing one more uit of a factor

ex: If with one worker a company makes 10 dollars and with 2 a company makes 15, the mrp of the secons worker is 5 dollars

rental rate

the cost, explicit of implicit, of using a unit of an asset, either land or capital, for a given period of time

ex: when renting ice skates at a rink, the rental rate is $10 an hour

economic rent

the payment to a factor of production in excess of the minimum pament necesary to employ that factor

ex: Bob only requests to be paid $18 an hour to work at target, but the company decides to pay him $20 an hour. The economic rent is $2

marginal factor cost

the additional cost of employing an additional unit of a factor of production

ex: when hiring the 3rd employee, the employer realizes that thrid employee costs the company $12 additional dollars (mfc)

cost-minimization rule

employ factors so that the margianal product per dollar spent on each factor is the same; this rule is used by a firm to determine the cost-minimizing combination of inputs

ex: a supermarket wants to implement the right balance of self-checkout machines and cashiers. using the cost minimization formula, one can find the optimal level of the marginal product of labor with respect to wage until it equals the marginal product of capital with respect to rental rate.

compensating differentials

wage differences across jobs that reflect the fact that some jobs are less pleasant or more dangerous than others

ex: garbage men may make more than mail men, despite the fact that they require similar skills, as the job is less desirable

unions

organizations of workers that try to raise wages and improve working conditions for their members by bargaining collectively

ex: school teachers are part of unions to help promote good pay and fair conditions

efficiency wages

wages that exceed the market equilibrium wage rate: employers use efficiecy wages to motivate hard work and reduce work turnover

ex: an above-equilibrium wage offered by a firm to attract a more talented pool of job applicants