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Economics 202 ch 24

Principles of Economics ch 24

QuestionAnswer
Marginal Revenue Product (MRP) The change in total revenue from employing an additional factor unit.
The demand for a factor (labor, land, capital, entrepreneurship) is: A derived demand.
One way to calculate the marginal revenue product of each additional labor is to calculate the total revenue generated with: Different quantities of labor. The MRP of labor is the change in total revenue for each additional unit of labor.
The second way to calculate the marginal revenue product of each additional labor is to multiply: The marginal physical product (MPP) of the labor by the marginal revenue of the output.
As large amounts of variable input are combined with fixed inputs: Eventually the MPP of the variable input declines.
Marginal Factor Cost (MFC) The additional cost from employing an additional factor unit.
The Profit-Maximization Rule for Employing Factors It is profitable to employ a factor if it generates more marginal revenue than marginal cost.
A producer employs additional factor units up to the quantity where: Marginal revenue product equals marginal factor cost. (MRP = MFC)
As the price (wage rate) paid for labor increased: The number of workers employed decreased.
When you move upward along the MRP curve to a higher wage rate: A lesser quantity of labor is demanded.
The determinants of factor demand cause the: MRP of a factor to increase or decrease.
The factor demand curve (MRP curve) shifts to the _____ (an increase in factor demand) or to the _______ (a decrease in factor demand). Right, Left
The determinants of factor demand are: Product price, factor productivity, and prices of related factors.
Value of the Marginal Product Is equal to the price of the product times the MPP of the factor.
To achieve the cost-minimizing combination of factors: Producers will consider factor productivity (MPP) for each factor and the price of each factor.
At the cost-minimizing combination factors, the ratio of: MPP to factor price will be the same for all factors.
Elasticity of Demand for Labor Measures the responsiveness of employers to a change in the wage rate; the percentage change in the quantity demanded of labor divided by the percentage change in the wage rate.
The determinants of the elasticity of demand for labor are: The number of substitutes factors, the price elasticity of demand for the product that the labor produces, and the percentage that labor costs make up total costs.
For a perfectly competitive labor employer, the labor supply curve will be: Horizontal (perfectly elastic) at the market wage rate. Wage and marginal factor cost are the same.
The labor supply curve in a particular labor market will be: Upward sloping.
Factors that cause the labor supply curve to shift are: The determinants of labor supply.
The Determinants of Labor Supply are: Wage rates in alternative labor markets and nonmoney aspects of a job.
What are the factors that cause wage rates in different labor markets to differ? Differences in worker's MRP, differences in nonmoney aspects of jobs, rareness of the skills required, training costs, and relocation costs.
Screening Device A characteristic used by employers as their basis for hiring and promoting employees.
Created by: dengler
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