Resource Market - Yetinomics '18

Resource Market - Yetinomics '18

Resource Market Mr. Barnett AP Microeconomics UHS Factors of Production 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

and quantities of these inputs are determined by supply & demand in factor markets. Factors of Production Marginal

Revenue Product (MRP): is the additional revenue generated from using 1 more unit of input Marginal Factor Cost (MFC): is the additional

cost incurred by employing one more unit of the input Note: Similar to the concept of marginal revenue and marginal cost, which measures the additional benefits and costs of producing another unit of output, we use the concept of marginal revenue product and marginal resource

cost which measures the additional revenue and additional cost from using one more input. Factors of Production - PC Perfectly competitive firm is both a price taker

and a wage taker.

Each firm is too small to affect either the price of output or the price of input (like labor) Thus, Marginal Factor Cost is simply the wage (w) MFC = W = supply of labor (Sl) Imperfect Competitive Firm

Monopsony When only one buyer in the market

For labor market, only one employer Large enough to affect wage rate

Upward sloping supply curve

Higher wage rates, more supply of labor Wage setter; not wage-taker Monopsony

To employ one more worker, the monopsonist must not only pay a higher wage rate to the next worker, but also pay a higher wage to all the workers it could have hired at a lower wage rate The firm will employ a quantity

of labor where the marginal revenue product is equal to the marginal resource cost. But the wage rate at that quantity is determined from the supply curve of labor. The monopsonist only has to

pay the wage that workers at that quantity level are willing to work for. Examples of Monopsonist Firms

Monopsonist & Minimum Wage Minimum wage for a monopsonist

More workers hired But still less than perfectly competitive Q Makes monopsonist a wage-taker

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