Economics 1021A/B Study Guide - Quiz Guide: Diminishing Returns, Marginal Product, Perfect Competition

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: bruce hammond

Document Summary

International trade has strong effects on the distribution of income within a country: Resources can"t move immediately or costless from one industry to another. Industries differ in the factors of production they demand. Specific factors model: countries as a whole benefit from trade, but it may hurt significant groups within the country. } with the number of people already employed. Mpl: marginal product of labor; derivative of the production function w. r. t. labor. Slope of ppf: opportunity costs of cars in terms of food = - mplf / mplc. The opportunity cost rises with the amount of the good already employed: diminishing returns to labor. Labor demand: profit-maximizing number of workers. wc = mplc x pc wf = mplf x pf. Equilibrium wage and allocation of labour where labor demand functions intersect. wf = wc mplf x pf = mplc x pc - mplf / mplc = - pc.