ECON 1116 Chapter 18: Market for Factors of Production

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orangemallard165

30 Nov 2016

School

Northeastern University

Department

Economics

Course

ECON 1116

Professor

Pritchard Robert

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Document Summary

Chapter 18: the markets for the factors of production. Your income is a small piece of a larger economic picture earn it in wages and fringe benefits rest went to landowners and to owners of capital. Factors of production- inputs used to produce goods and services. Demand for a factor of production is a derived demand firm"s demand for a factor of production is derived from its decision to supply a good in another market. Labor markets are governed by supply and demand. We assume firm is competitive in market for apples and apple pickers price takers. Assume firm is profit-maximizing firm does not directly care about the # of workers it has of the # of apples it produces cares about profit. Firm"s supply of apples and demand for workers is derived from primary goal of maximizing profit. 18. 1b: the production function and the marginal product of labor.

Related Questions

Assume that apples are produced in a perfectly competitive market. Columbia’s Orchard is a typical firm that grows and sells apples. Currently, Columbia earns zero economic profit, and the market price of apples is $10 per bushel.

a) Draw a correctly labeled graph showing Columbia’s demand curve, average total cost curve, and marginal cost curve, and show the profit-maximizing quantity, labeled Qc.

b) Suppose an increase in the popularity of apple, the demand for apple increases.

How will the increase in the demand for apples affect Columbia’s economic profit in the short run? Explain.

c) What will happen to Columbia’s economic profit in the long run? Explain.

greenlizard128

If labor productivity increases,

Question 8 options:

the demand for labor increases.

labor costs rise by equal increments.

jobs will relocate.

some workers will be laid off.

In labor markets, the substitution effect occurs when

Question 10 options:

a change in the price of a substitute input reduces the cost of capital.

a change in the price of a substitute input causes the demand for labor to change in the same direction.

a substitute good also functions as a compliment.

the cost of production falls enough that the firm will produce a larger amount of output.

The demand for labor is

Question 6 options:

	derived from the satisfaction that hiring the inputs provides the owner or manager of the firm more money.
	totally unrelated to the demand curve for the final product.
	derived from the demand for the final product being produced.
	derived from a utility-maximizing process similar to that used to derive the demand curve for goods and services.

blueleopard622

1. In a market economy, the high salaries of some star baseball players such as Adrian Gonzalez, are determined by

		Team owners, based on the total number of star athletes they plan to hire.
	B	advertising companies, based on what they are willing to pay to advertise their products at baseball games.
	C	the interaction of the demand for star athletes and the supply of star athletes.
	D	consumers, based on their willingness to watch baseball games.

2. Demand in factor markets differs from demand in product markets in that

	A	the demand for a factor of production is difficult to determine.
B		the demand for a factor of production is influenced by workers' productivity and by the producers' expected sales revenues, not by tastes and preferences of consumers.
C		demand for a factor of production is based on the tastes and preferences of firms.
D		demand for a factor of production is based on the tastes and preferences of resource owners.

3. The demand for labor is described as a derived demand because

A		it is derived by workers seeking to earn income to fund the consumption of goods and services.
B		it is derived by producers seeking to make profits by starting new businesses.
C		it is derived from the demand for products that use labor in the production process.
D		it is derived from government institutions that rely on labor markets for the purpose of raising tax revenue.

4. Which of the following is not an example of a derived demand?

A		Several of the animated films released between 1999 and 2001 failed to earn a profit, which caused some companies to stop making these films, thereby decreasing the demand for animators.
B		Seth Bullock, a personal injury attorney, complains that he is earning far less now than a few years ago largely because personal injury cases have been undercut by state laws limiting class-action suits and payouts on damages.
C		Millicent Manning, the owner of a furniture store, is concerned that her sales have fallen for the past six months. She attributes this to the downturn in the real estate market.
D		As advancements in medical technology increase the safety and success of laser eye surgery, the demand for opticians has decreased.

5. Marginal revenue product for a perfectly competitive seller is equal to

A		the output price multiplied by the total product of labor.
B		the output price multiplied by the number of workers hired.
C		the change in total revenue that results from hiring another worker.
D		the marginal cost of production.

6. What is the difference between labor's marginal product and marginal revenue product?

A		The marginal product of labor is the increase in output as a result of hiring an additional worker while the marginal revenue product of labor is the increase in profit as a result of hiring an additional worker.
B		The marginal revenue product of labor is the dollar value of hiring an additional worker while the marginal product of labor is the increase in the firm's physical output as a result of hiring an additional worker.
C		The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue.
D		Labor's marginal product is a measure of labor's productivity while labor's marginal revenue product is a measure of labor's ability to sell the firm's products.

7. What is the difference between a firm's marginal revenue and its marginal revenue product?

A		Marginal revenue is the change in sales revenue from selling one more unit of output while marginal revenue product is the profit earned from hiring one more worker.
B		Marginal revenue is the change in sales revenue from selling one more unit of output while marginal revenue product is the change in total revenue from hiring one more worker.
C		Marginal revenue is the increase in revenue when a firm raises its output price while marginal revenue product is the increase in the marginal product when a firm hires an additional worker.
D		There is no difference between the two terms.

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ECON 1116 Chapter 18: Market for Factors of Production

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