# The Markets for the Factors of Production THE DEMAND FOR LABOR

Size: px
Start display at page:

Download "The Markets for the Factors of Production THE DEMAND FOR LABOR"

Transcription

1 The Markets for the Factors of Factors of production are the inputs used to produce goods and services. The demand for a factor of production is a derived demand. A firm s demand for a factor of production is derived from its decision to supply a good in another market. THE DEMAND FOR LABOR Figure 1 The Versatility of and Labor markets, like other markets in the economy, are governed by the forces of supply and demand. Price of Apples (a) The Market for Apples age of Apple Pickers (b) The Market for Apple Pickers P Q L Apples Apple Pickers The apple producer s demand for apple pickers is derived from the market demand for apples. Copyright 23 Southwestern/Thomson Learning The Competitive Profit-Maximizing Firm Most labor services, rather than being final goods ready to be enjoyed by consumers, are inputs into the production of other goods. The production function illustrates the relationship between the quantity of inputs used and the quantity of output of a good. 1

2 Table 1 How the Competitive Firm Decides How Much Labor to Hire The marginal product of labor is the increase in the amount of output from an additional unit of labor. MPL = Q/ L MPL = (Q 2 Q 1 )/(L 2 L 1 ) Diminishing Marginal As the number of workers increases, the marginal product of labor declines. As more and more workers are hired, each additional worker contributes less to production than the prior one. The production function becomes flatter as the number of workers rises. This property is called diminishing marginal product. Diminishing marginal product refers to the property whereby the marginal product of an input declines as the quantity of the input increases. Figure 2 The Function Quantity of Apples function The Value of the Marginal Product and the for Labor The value of the marginal product is the marginal product of the input multiplied by the market price of the output. VMPL = MPL P Apple Pickers 2

3 The Value of the Marginal Product and the for Labor The value of the marginal product (also known as marginal revenue product) is measured in dollars. It diminishes as the number of workers rises because the market price of the good is constant. The Value of the Marginal Product and the for Labor To maximize profit, the competitive, profitmaximizing firm hires workers up to the point where the value of the marginal product of labor equals the wage. VMPL = age The value-of-marginal-product curve is the labor demand curve for a competitive, profitmaximizing firm. Figure 3 The Value of the Marginal Value of the Marginal Product Market wage FYI Input and Output : Two Sides of the Same Coin hen a competitive firm hires labor up to the point at which the value of the marginal product equals the wage, it also produces up to the point at which the price equals the marginal cost. Value of marginal product (demand curve for labor) Profit-maximizing quantity Apple Pickers hat Causes the Labor- Curve to Shift? The Output Price Technological Change The of Other factors THE SUPPLY OF LABOR The Trade-off between ork and Leisure The labor supply curve reflects how workers decisions about the labor-leisure trade-off respond to changes in opportunity cost. An upward-sloping labor supply curve means that an increase in the wages induces workers to increase the quantity of labor they supply. 3

4 hat Causes the Labor Curve to Shift? Changes in Tastes Changes in Alternative Opportunities Immigration EQUILIBRIUM IN THE LABOR MARKET The wage adjusts to balance the supply and demand for labor. The wage equals the value of the marginal product of labor. Figure 4 Equilibrium in a Labor Market Shifts in Labor age (price of labor) Equilibrium wage, Labor supply and labor demand determine the equilibrium wage. Shifts in the supply or demand curve for labor cause the equilibrium wage to change. Equilibrium employment, L Labor Figure 5 A Shift in Labor Shifts in Labor age (price of labor) reduces the wage..., S 1. An increase in labor supply... S An increase in the supply of labor: Results in a surplus of labor. Puts downward pressure on wages. Makes it profitable for firms to hire more workers. Results in diminishing marginal product. Lowers the value of the marginal product. Gives a new equilibrium. L L Labor and raises employment. 4

5 Shifts in Labor Figure 6 A Shift in Labor An increase in the demand for labor : Makes it profitable for firms to hire more workers. Puts upward pressure on wages. Raises the value of the marginal product. Gives a new equilibrium. age (price of labor) 1. An increase in labor demand increases the wage... D, D L L Labor and increases employment. Table 2 Productivity and age Growth in the United States THE OTHER FACTORS OF PRODUCTION: LAND AND CAPITAL refers to the equipment and structures used to produce goods and services. The economy s capital represents the accumulation of goods produced in the past that are being used in the present to produce new goods and services. OTHER FACTORS OF PRODUCTION: LAND AND CAPITAL Prices of Land and The purchase price is what a person pays to own a factor of production indefinitely. The rental price is what a person pays to use a factor of production for a limited period of time. Equilibrium in the Markets for Land and The rental price of land and the rental price of capital are determined by supply and demand. The firm increases the quantity hired until the value of the factor s marginal product equals the factor s price. 5

6 Figure 7 The Markets for Land and Equilibrium in the Markets for Land and Rental Price of Land (a) The Market for Land Rental Price of (b) The Market for Each factor s rental price must equal the value of its marginal product. They each earn the value of their marginal contribution to the production process. P P Q Q Land Linkages among the Factors of Factors of production are used together. The marginal product of any one factor depends on the quantities of all factors that are available. Linkages among the Factors of A change in the supply of one factor alters the earnings of all the factors. A change in earnings of any factor can be found by analyzing the impact of the event on the value of the marginal product of that factor. Summary Summary The economy s income is distributed in the markets for the factors of production. The three most important factors of production are labor, land, and capital. The demand for a factor, such as labor, is a derived demand that comes from firms that use the factors to produce goods and services. Competitive, profit-maximizing firms hire each factor up to the point at which the value of the marginal product of the factor equals its price. The supply of labor arises from individuals trade-off between work and leisure. An upward-sloping labor supply curve means that people respond to an increase in the wage by enjoying less leisure and working more hours. 6

7 Summary The price paid to each factor adjusts to balance the supply and demand for that factor. Because factor demand reflects the value of the marginal product of that factor, in equilibrium each factor is compensated according to its marginal contribution to the production of goods and services. Summary Because factors of production are used together, the marginal product of any one factor depends on the quantities of all factors that are available. As a result, a change in the supply of one factor alters the equilibrium earnings of all the factors. 7

### The Economics of Labor Markets. salary

The Economics of Labor Markets salary Factors of Production Factors of production are the inputs used to produce goods and services. The Market for the Factors of Production The demand for a factor of

### The Markets for the Factors of Production

18 The Markets for the Factors of Production PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University 1 Factors of production Factors of Production Inputs used to produce goods and

### Notes for Chapter 18 Markets for Factors of Production. Why are apples cheaper (per pound) than grapes?

Notes for Chapter 18 Markets for Factors of Production Why is chicken cheaper than steak? Why are apples cheaper (per pound) than grapes? We know how to answer these questions. What about: Why do airline

### Factors of Production and Factor Markets

Factors of Production and Factor Markets Factors of production: the inputs used to produce goods and services. Labor Land Capital: the equipment and structures used to produce goods and services. Prices

### Economics. 18 this chapter, The Markets for the Factors of Production. look for the answers to these questions: N. Gregory Mankiw.

C H A T E R In 8 this chapter, look for the answers to these questions: The Markets for the Factors of roduction R I N C I E S O F Economics N. Gregory Mankiw remium oweroint Slides by Ron Cronovich 29

### Demand & Supply of Resources

Resource Markets 1 Demand & Supply of Resources Resource demand Firms demand resources As long as marginal revenue exceeds marginal cost To maximize profit Resource supply People supply resources To the

### Choose the one alternative that BEST completes the statement or answers the question.

CHAPTER 3 The Demand for Labor In addition to the multiple choice and quantitative problems listed here, you should answer review questions 1, 3, 5, and 7 and problems 1-4 at the end of chapter 3. Multiple-Choice

### Factors of Prodution. Unit 3: The Nature and Function of Factor Markets

Factors of Prodution Unit 3: The Nature and Function of Factor Markets 4 Factors of Production Labor Capital Land Entrepreneurship Factor Markets Factors of production (labor, capital, and land) are paid

### The Economics of Labor Markets

6 The Economics of Labor Markets Page Left Blank Intentionally 18 The Markets for the Factors of Production When you finish school, your income will be determined largely by what kind of job you take.

### Textbook Media Press. CH 10 Taylor: Principles of Economics 3e 1

CH 10 Taylor: Principles of Economics 3e 1 Quantity Produced by a Perfectly Competitive Firm A perfectly competitive firm is a price taker, which means that it must accept the prices at which its sell

### Chapter 17: Labor Markets

Chapter 17: Labor Markets Econ 102: Introduction to Microeconomics 1 1.1 Goals of this class Goals of this class Learn how employment and wages are determined in equilibrium. Learn what can shift labor

### Chapter 11 Markets for Factors of Production

Chapter 11 Markets for Factors of Production Chapter Outline 11. 11. 11. 11. 1. 2. 3. 4. The Market for Other Factors of Production: Physical Capital and Land Modified by Key Ideas Key Ideas 1. The three

### Chapter 28 The Labor Market: Demand, Supply, and Outsourcing

Chapter 28 The Labor Market: Demand, Supply, and Outsourcing Learning Objectives After you have studied this chapter, you should be able to 1. define marginal factor cost, marginal physical product of

### Utility Theory and the Downward Sloping Demand Curve.

Tuesday Notes Utility Theory and the Downward Sloping Demand Curve. Five fundamentals of consumer choice 1. We make decisions purposefully and We are motivated and act based on rational self-interest.

### 5 FIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRY

5 FIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRY The s of Production 1 Copyright 2004 South-Western The Market Forces of Supply and Demand Supply and demand are the two words that economists use most often.

### Application: the effect of immigration on domestic wages

LABOUR DEMAND Application: the effect of igration on domestic wages Case 1. Immigrants and nonigrants are perfect substitutes in production W S 0 S 1 Law of one price: all workers earn the same wage W

### UNIT 4 PRACTICE EXAM

UNIT 4 PRACTICE EXAM 1. The prices paid for resources affect A. the money incomes of households in the economy B. the allocation of resources among different firms and industries in the economy C. the

### The Labor Market Part I

The Labor Market Part I All labor that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence. Martin Luther King, Jr. Labor Supply The labor supply includes those

### Chapter 8 The Labor Market: Employment, Unemployment, and Wages

Chapter 8 The Labor Market: Employment, Unemployment, and Wages Multiple Choice Questions Choose the one alternative that best completes the statement or answers the question. 1. If the price of a factor

### Unit V: Factor Markets. Problem Set #5 Points Distribution

Unit V: Factor Markets Problem Set #5 Points Distribution Question #1 Real World Application of Key Concepts 5 Points EACH 2 Points Definition 3 Points Clear Example 1. Derived Demand Definition (2 points):

### The Firm s Objective. A Firm s Total Revenue and Total Cost. The economic goal of the firm is to maximize profits. A Firm s Profit

The s of Production Chapter 13 Copyright 2001 by Harcourt, Inc. The s of Production The Law of Supply: Firms are willing to produce and sell a greater quantity of a good when the price of the good is high.

### Input Demand: The Labor and Land Markets

Chapter 10 Input Demand: The Labor Prepared by: Fernando & Yvonn Quijano 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair Input Demand: The Labor 1 2 10 Chapter Outline

### Profit. Total Revenue The amount a firm receives for the sale of its output. Total Cost The market value of the inputs a firm uses in production.

Profit Total Revenue The amount a firm receives for the sale of its output. Total Cost The market value of the inputs a firm uses in production. Profit is the firm s total revenue minus its total cost.

### Lecture 10. The costs of production

Lecture 10 The costs of production By the end of this lecture, you should understand: what items are included in a firm s costs of production the link between a firm s production process and its total

### Chapter 14. Chapter Outline

Chapter 14 Labor Chapter Outline A Perfectly Competitive Firm s Demand for Labor Market Demand Curve for Labor An Imperfect Competitor s Demand for Labor Labor Supply Market Supply Curve Monopsony Minimum

Chapter 14 Labor Chapter Outline A Perfectly Competitive Firm s Demand for Labor Market Demand Curve for Labor An Imperfect Competitor s Demand for Labor Labor Supply Market Supply Curve Monopsony Minimum

### ****** 1. How is the demand for an input dependent upon the demand for an output? 2. Given a wage, how does a firm decide how many people to hire?

1 Chapter 4- Income distribution and factor pricing Syllabus-Input markets: demand for inputs; labour markets, land markets, profit maximisation condition in input markets, input demand curves, distribution

### Chapter 21. Consumer Choice

Consumer Choice Utility is most closely defined as a) extra. b) marginal. c) usefulness. d) satisfaction. e) opportunity cost. Copyright Houghton Mifflin Company. All rights reserved. 21 2 Utility is most

### Supply, Demand, and Government Policies. Copyright 2004 South-Western

Supply, Demand, and Government Policies Copyright 2004 South-Western Supply, Demand, and Government Policies In a free, unregulated market system, market forces establish equilibrium prices and exchange

### FINALTERM EXAMINATION FALL 2006

FINALTERM EXAMINATION FALL 2006 QUESTION NO: 1 (MARKS: 1) - PLEASE CHOOSE ONE Compared to the equilibrium price and quantity sold in a competitive market, a monopolist Will charge a price and sell a quantity.

### Microeconomics. Use the graph below to answer question number 3

More Tutorial at Microeconomics 1. Opportunity costs are the values of the: a. minimal budgets of families on welfare b. hidden charges passed on to consumers c. monetary costs of goods and services *

### Microeconomics. Use the graph below to answer question number 3

More Tutorial at Microeconomics 1. Opportunity costs are the values of the: a. minimal budgets of families on welfare b. hidden charges passed on to consumers c. monetary costs of goods and services *

### Wednesday, October 31 Lecture: Labor Markets

Amherst College Department of Economics Economics 111 Section 3 Fall 2012 Wednesday, October 31 ecture: abor Markets abor Markets: Demand and Supply Every market includes to essential elements: demand

### Pledge (sign) I did not copy another student s answers

Economics 4020 Dr. Rupp Test #1 Fri. Sept 23 rd, 2011 20 Multiple Choice questions (2.5 points each) Pledge (sign) I did not copy another student s answers 1. The profit maximization rule for a firm is

### Ecn Intermediate Microeconomic Theory University of California - Davis June 11, 2009 Instructor: John Parman. Final Exam

Ecn 100 - Intermediate Microeconomic Theory University of California - Davis June 11, 2009 Instructor: John Parman Final Exam You have until 8pm to complete the exam, be certain to use your time wisely.

### Case: An Increase in the Demand for the Product

1 Appendix to Chapter 22 Connecting Product Markets and Labor Markets It should be obvious that what happens in the product market affects what happens in the labor market. The connection is that the seller

### Unit 4: The Factor Market

Unit 4: The Factor Market (aka: The Resource Market or Input Market) - Factor Wages - Perfect Competition vs. Monopsonies - Optional Combination of Factors - Income Inequality - Taxation 7 Market in which

### Practice Exam 3: S201 Walker Fall with answers to MC

Practice Exam 3: S201 Walker Fall 2007 - with answers to MC Print Your Name: I. Multiple Choice (3 points each) 1. If marginal utility is falling then A. total utility must be falling. B. marginal utility

### Test 2. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Name R# ECO 2301.007 - Roach Test 2 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Air pollution generated by a steel mill is an example of 1)

### Econ 321 Test 02 Fall 2004

Econ 321 Test 02 Fall 2004 True/False Indicate whether the sentence or statement is true or false. 1. Either a rise in marginal cost or a fall in marginal revenue could cause a firm to reduce its output

### Economics 448W, Notes on the Classical Supply Side Professor Steven Fazzari

Economics 448W, Notes on the Classical Supply Side Professor Steven Fazzari These notes cover the basics of the first part of our classical model discussion. Review them in detail prior to the second class

### Microeconomics. Use the Following Graph to Answer Question 3

More Tutorial at www.dumblittledoctor.com Microeconomics 1. To an economist, a good is scarce when: *a. the amount of the good available is less than the amount that people want when the good's price equals

### ECO232 Chapter 25 Homework. Name: Date: Use the following to answer question 1: Figure: Coffee and Comic Books

ECO232 Chapter 25 Homework Name: Date: Use the following to answer question 1: Figure: Coffee and Comic Books 1. (Figure: Coffee and Comic Books) Refer to the figure. A consumer has \$5 to spend on comic

### AP Microeconomics Review Sample Questions

AP Microeconomics Review Sample Questions Sample Multiple-Choice Questions The following are examples of the kinds of multiple-choice questions found on the examination. The distribution of topics and

### The Market Forces of Supply and Demand

Theory of the Firm The Market Forces of Supply and Demand Supply and demand are the two words that economists use most often Supply and demand are the forces that make market economies work. Modern microeconomics

### Week 5: The Costs of Production. 31 st March 2014

Week 5: The Costs of Production 31 st March 2014 WHAT ARE COSTS?! According to the Law of Supply:! Firms are willing to produce and sell a greater quantity of a good when the price of the good is high.!

### Ecn Intermediate Microeconomics University of California - Davis December 7, 2010 Instructor: John Parman. Final Exam

Ecn 100 - Intermediate Microeconomics University of California - Davis December 7, 2010 Instructor: John Parman Final Exam You have until 12:30 to complete this exam. Be certain to put your name, id number

### Econ190 May 1, No baseball caps are allowed (turn it backwards if you have one on).

Heather Krull Final Exam Econ190 May 1, 2006 Name: Instructions: 1. Write your name above. 2. No baseball caps are allowed (turn it backwards if you have one on). 3. Write your answers in the space provided

### Practice Exam 3 Questions

1. What is the main goal of a firm? A) To be as big as possible. B) To hire as many people as possible. C) To make as much profit as possible. D) All of the above answers are correct. Practice Exam 3 Questions

### Economics N. Gregory Mankiw. The Markets for the Factors of Production. In this chapter, look for the answers to these questions CHAPTER

Seventh Edition Principles of Economics N. Gregory Mankiw CHAPTER 18 The Markets for the Factors of Production In this chapter, look for the answers to these questions hat determines a competitive firm

### Choose the single best answer for each question. Do all of your scratch-work in the side and bottom margins of pages.

Econ 0, Sections 3 and 4, S, Schroeter Exam #4, Special code = 000 Choose the single best answer for each question. Do all of your scratch-work in the side and bottom margins of pages.. Gordon is the owner

### Preview from Notesale.co.uk Page 6 of 89

Guns Butter 200 0 175 75 130 125 70 150 0 160 What it shows: the maximum combinations of two goods an economy can produce with its existing resources and technology; an economy can produce at points on

### Government Regulation

Government Regulation What do you think is the market price for renting an apartment in Plainfield? What happens to the quantity of demand and supply after the price change? List four outcomes that would

### Macro CH 23 sample test question

Class: Date: Macro CH 23 sample test question Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Potential GDP is defined as a. the level of GDP created by

### Intermediate Macroeconomics

Intermediate Macroeconomics ECON 3312 Lecture 2 William J. Crowder Ph.D. Mercantilism Economic Nationalism Beggar-thy-neighbor policies Bullionism Regulate everything! Trade restrictions Monopoly rights

### Refer to the given data. At the profit-maximizing level of employment, this firm's total labor cost will be: A. \$16. B. \$30. C. \$24. D. \$32.

1. The more work people do, all other things unchanged, the: A) more their free time. B) greater their nonmarket use of time. C) less income they have. D) less leisure they have. 2. A wage will the leisure.

### Ecn Intermediate Microeconomic Theory University of California - Davis September 9, 2009 Instructor: John Parman. Final Exam

Ecn 100 - Intermediate Microeconomic Theory University of California - Davis September 9, 2009 Instructor: John Parman Final Exam You have until 1:50pm to complete this exam. Be certain to put your name,

### The Behavior of Firms

Chapter 5 The Behavior of Firms This chapter focuses on how producers make decisions regarding supply. Individuals demand goods and services. Firms supply goods and services. An important assumption is

### ECO 2023 Principles of Microeconomics Fall 2013 Practice Test #2. 1. Which of the following are factors of production?

ECO 2023 Principles of Microeconomics Fall 2013 Practice Test #2 1. Which of the following are factors of production? A. Output in a production function. B. Productivity. C. Land, labor, capital, and entrepreneurship.

### Supply and demand are the two words that economists use most often.

Chapter 13. The Costs of Production The Market Forces of Supply and Demand Supply and demand are the two words that economists use most often. Supply and demand are the forces that make market economies

### CIE Economics A-level

CIE Economics A-level Topic 3: Government Microeconomic Intervention c) Labour market forces and government intervention Notes Demand for and supply of labour The labour market is a factor market. The

### Chapter 3: Productivity, Output, and Employment

Chapter 3: Productivity, Output, and Employment Yulei Luo SEF of HKU January 26, 2015 Luo, Y. (SEF of HKU) ECON2102/2220: Intermediate Macro January 26, 2015 1 / 29 Chapter Outline The Production Function

### 6) Refer to Table 2-1. What is Finland's opportunity cost of producing one cell phone?

Principle of Macroeconomics, Chapter two Chapter three Summer B, 2017, FIU Chapter two 1) The principle of is that the economic cost of using a factor of production is the alternative use of that factor

### Lesson 10: Specific-Factors Model (continued)

International trade in the global economy 60 hours II Semester Luca Salvatici luca.salvatici@uniroma3.it Lesson 10: Specific-Factors Model (continued) 1 1 Specific-Factors Model The Home Country Opportunity

### I. Decision Making Units

LECTURE NOTE 02 DEMAND, SUPPLY AND MARKET EQUILIBRIUM Outline of today s lecture: I. Decision Making Units... 1 II. Circular Flow... 2 III. Demand in Output Markets... 4 IV. Supply in Output Markets...

### Markets for Factor Inputs

C H A P T E R 14 Markets for Factor Inputs Prepared by: Fernando & Yvonn Quijano CHAPTER 14 OUTLINE 14.1 Competitive Factor Markets 14.2 Equilibrium in a Competitive Factor Market 14.3 Factor Markets with

### 1 of 14 5/1/2014 4:56 PM

1 of 14 5/1/2014 4:56 PM Any point on the budget constraint Gives the consumer the highest level of utility. Represent a combination of two goods that are affordable. Represents combinations of two goods

### INTRODUCTION ECONOMIC PROFITS

INTRODUCTION This chapter addresses the following key questions: What are profits? What are the unique characteristics of competitive firms? How much output will a competitive firm produce? Chapter 7 THE

### Choose the single best answer for each question. Do all of your scratch work in the margins or in the blank space at the bottom of the last page.

Econ 0, Section 2, S0, Schroeter Exam #4, Special code = Choose the single best answer for each question. Do all of your scratch work in the margins or in the blank space at the bottom of the last page..

### Choose the single best answer for each question. Do all of your scratch work in the margins or in the blank space at the bottom of the last page.

Econ 0, Section 2, S0, Schroeter Exam #4, Special code = 2 Choose the single best answer for each question. Do all of your scratch work in the margins or in the blank space at the bottom of the last page..

### Quiz #3 Week 03/22/2009 to 03/28/2009

Quiz #3 Week 03/22/2009 to 03/28/2009 You have 30 minutes to answer the following 15 multiple choice questions. Record your answers in the bubble sheet. Your grade in this quiz will count for 1% of your

### Final Exam - Solutions

Ecn 100 - Intermediate Microeconomics University of California - Davis December 7, 2010 Instructor: John Parman Final Exam - Solutions You have until 12:30 to complete this exam. Be certain to put your

### MARKETS FOR LABOR Microeconomics in Context (Goodwin, et al.), 3 rd Edition

Chapter 9 MARKETS FOR LABOR Microeconomics in Context (Goodwin, et al.), 3 rd Edition Chapter Overview This chapter deals with supply and demand for labor. You will learn about why the supply curve for

### Perfectly Competitive Supply. Chapter 6. Learning Objectives

Perfectly Competitive Supply Chapter 6 McGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Learning Objectives 1.Explain how opportunity cost is related to the supply

### Producing Goods & Services

Producing Goods & Services Supply is the quantities of a product or service that a firm is willing and able to make available for sale at all possible prices. The Law of Supply states that the quantity

### causing MARGINAL PRODUCT OF LABOR to fall beyond some point. iv. PRODUCT PRICE : Because this is a competitive market, the PRODUCT PRICE = MARKET

WAGE DETERMINATION I. A FOCUS ON LABOR a. The basic principles for labor also apply to other factors of production b. About 70% of all income in the U.S. flows to households in the form of wages and salaries.

### Managerial Economics ECO404 SUPPLY ANALYSIS

SUPPLY ANALYSIS Lesson 5 BASIS FOR SUPPLY The term Supply refers to the quantity of a good or service that producers are willing and able to sell during a certain period under a given set of conditions.

### International Trade: Economics and Policy. LECTURE 6: Absolute vs. Comparative Advantages (continued)

Department of Economics - University of Roma Tre Academic year: 2016-2017 International Trade: Economics and Policy LECTURE 6: Absolute vs. Comparative Advantages (continued) International Trade Equilibrium

### Labor Market Core Course

Labor Market Core Course Key Concepts and Policy Issues 1 The Main Objective Basic description of the labor market A framework for economic analysis iscuss some policy applications iscuss some alternative

### 2. Why is a firm in a purely competitive labor market a wage taker? What would happen if it decided to pay less than the going market wage rate?

Chapter Wage Determination QUESTIONS. Explain why the general level of wages is high in the United States and other industrially advanced countries. What is the single most important factor underlying

### 13 Wage Determination

13 Wage Determination Labor, Wages,and Earnings Wages Price paid for labor Direct pay plus fringe benefits Wage rate Nominal wage Real wage General level of wages LO1 13-2 Global Perspective LO1 13-3 Role

### MICROECONOMICS SECTION I. Time - 70 minutes 60 Questions

MICROECONOMICS SECTION I Time - 70 minutes 60 Questions Directions: Each of the questions or incomplete statements below is followed by five suggested answers or completions. Select the one that is best

### Unions and Labor Market Monopoly Power

29 Unions and Labor Market Monopoly Power Learning Objectives After you have studied this chapter, you should be able to 1. outline the essential history of the labor union movement; 2. discuss the current

### Answer all the following questions:-

Answer all the following questions:- QUESTION ONE / TRUE ( ) OR FALSE (X) / (10 MARKS) 1. Total revenue = price x sold quantity. 2. The purpose of a production function is to tell us just how much output

### Chapter 6. Consumer Choice & Demand. These slides supplement the textbook, but should not replace reading the textbook

Chapter 6 Consumer Choice & Demand These slides supplement the textbook, but should not replace reading the textbook 1 In our analysis of consumer choice, what important assumption do we make? People would

### chapter: Solution Factor Markets and the Distribution of Income

Factor Markets and the Distribution of Income chapter: 19 1. In 2010, national income in the United States was \$11,722.6 billion. In the same year, 139 million workers were employed, at an average wage

### LO AGENDA Tues 12/1. QOD #37: Work with benefits Wage Determination Monopsony Unions (Effect of Unions wksht) HW: Read pp Q #7,9

LO1 13-1 AGENDA Tues 12/1 QOD #37: Work with benefits Wage Determination Monopsony Unions (Effect of Unions wksht) HW: Read pp 273-282 Q #7,9 10-2 QOD #37: Work with Benefits Workers are compensated by

What Is Perfect Competition? Perfect competition is an industry in which Many firms sell identical products to many buyers. There are no restrictions to entry into the industry. Established firms have

### 1. Demand: willingness to buy a good or service and the ability to pay for it; how much of an item an individual is willing to purchase at each price

1. Demand: willingness to buy a good or service and the ability to pay for it; how much of an item an individual is willing to purchase at each price 2. The two things needed for demand to exist are: willingness

### Lesson 1: What is Supply? Lesson 2: The Theory of Production Lesson 3: Cost, Revenue, and Profit Maximization

Lesson 1: What is Supply? Lesson 2: The Theory of Production Lesson 3: Cost, Revenue, and Profit Maximization 1 5 Supply BIG IDEAS = Responsibility, Choices, Changes, and Relationships Essential Questions:

### Practice Exam 3: S201 Walker Fall 2009

Practice Exam 3: S201 Walker Fall 2009 I. Multiple Choice (3 points each) 1. Which of the following statements about the short-run is false? A. The marginal product of labor may increase or decrease. B.

### Module 55 Firm Costs. What you will learn in this Module:

What you will learn in this Module: The various types of cost a firm faces, including fixed cost, variable cost, and total cost How a firm s costs generate marginal cost curves and average cost curves

### 3. Definition of constant returns to scale: the property whereby long-run average total cost stays the same as the quantity of output changes.

250 Chapter 13/The s of Production 3. Definition of constant returns to scale: the property whereby long-run average total cost stays the same as the quantity of output changes. 4. FYI: Lessons from a

### Quiz #5 Week 04/12/2009 to 04/18/2009

Quiz #5 Week 04/12/2009 to 04/18/2009 You have 30 minutes to answer the following 17 multiple choice questions. Record your answers in the bubble sheet. Your grade in this quiz will count for 1% of your

### b. The marginal opportunity cost of an executive s flight is the price the company could have earned from leasing the jet to someone else.

Chapter 6 Costs SOLUTIONS TO END-OF-CHAPTER QUESTIONS THE NATURE OF COSTS 1.1 The ships that return to Asia are half or completely empty; therefore, the cost of having more merchandise in them is almost

### FOR MORE PAPERS LOGON TO

ECO401- Economics Question No: 1 ( Marks: 1 ) - Please choose one Land is best described as: Produced factors of production. "Organizational" resources. Physical and mental abilities of people. "Naturally"

### Using Elasticity to Predict Cost Incidence. A Definition & A Question. Who pays when payroll tax added to wage rate?

Using Elasticity to Predict Cost Incidence A Definition & A Question Definition of Incidence: the fact of falling upon; in this case, where costs fall A Question for you what does a statement like this