1. Factors Market
Part 1

3. Factors of Production Factors, Resources, Inputs Land Labor Capital
Entrepreneurship

4. Perfectly Competitive Labor Market
Households = Supply
Firms = Demand
Derived Demand
Product Market Demand
Shifts Labor Market Demand

5. Perfectly Competitive Market and Firm

6. MPP and MRP MPP- marginal physical product
Additional output from additional unit of a resource
Change in TP from one more unit of resource
MRP- marginal revenue product
Additional revenue from additional unit of resource
Change in TR from one more unit of resource
MPP X MR= MRP
MPP X Price = MRP (in a perfectly competitive product market)

7. MRC Marginal Resource Cost (MFC=Marginal Factor Cost)
Additional cost from one more unit of resource
For labor, this is the wage
Perfectly Competitive Labor Market
Firms are wage takers
MRC (MFC) is perfectly elastic

15. Tomorrow’s Quiz Derived Demand MRP MFC (MRC) Monopsony
Extra Credit: Cost minimizing and Profit maximizing
combination of resources (open packet)

17. Monopsony

18. Cost Minimizing Combination of Resources at a Given Level of Output
MPP/$ of Labor = MPP/$ of Capital
$ = MRC Example
MPP last unit of labor = 5 Wage rate (MRC)= $10
MPP last unit of capital = MRC = $16
Labor MPP/$ = .5 Capital MPP/$ = .5

19. Optimal Combination (Profit Maximizing) of Resources
MRP/$ of Labor = MRP/$ of Capital= 1
$ = MRC
Example
MRP last unit of labor = $10 Wage rate (MRC)= $10
MRP last unit of capital = $ MRC = $16
Labor MRP/$ = Capital MRP/$ = 1

20. Perfectly Competitive Market and Firm
Supply = Marginal Resource Cost (MRC)
Demand = Marginal Revenue Product (MRP)
Profit-Max Q of Labor: MRP=MRC

21. What’s Left 4-6 Factors Market 7-14 Government and Market Failure
19/20 Bull's-eye Physical Challenge
On to MACRO

22. Year in Review Michael Brown and Eric Garner June SCOTUS decision
David Sweat and Richard Matt
Refugee Crisis- most accepting country
SC Church shooting town
US visit
Former Pat pleads guilty

24. Perfectly Competitive Firm
MRP>MRC- hire more
MRC>MRP- fire some

25. 11. Under what conditions is a firm’s MRP of labor curve the same as its demand curve for labor?
If firm hires in perfectly competitive resource market

28. MRP Change in TR with one additional unit of an input (labor)
PC product market may use
MRP = Product Price X MPP
Monopolist in Product Market MUST use
Change in TR

29. Monopolist and Perfectly Competitive Labor Market
Monopolist must drop the product price to sell more.
Monopolist must drop price when hiring more workers.
MRP is downward sloping due to decreasing MPP and decreasing price.
Must use change in TR to calculate MRP.
CANNOT multiply price and MPP because price is NOT MR!

32. Individual Supply of Labor Curve
Trade-Off between work and leisure

33. Individual Supply of Labor Curve
Trade-Off between work and leisure

34. Minimum Wage and Labor Unions

35. Minimum Wage in PC Labor Market?

37. Unions Collective Bargaining _________ of workers
Clayton Antirust Act (1914)

38. Unions in PC Labor Market?

39. Unions and Monopsonistic Labor Market?

40. Unions and Monopsonistic Labor Market
Bilateral Monopoly
One buyer, One seller
Outcome is difficult to predict

41. Minimum Wage with Monopsony in Labor Market?

42. Combination of Resources
Cost-Minimizing
MPPL/MFCL = MPPC/MFCC
Profit- Max
MRPL / MFCL = MRPC / MFCC = 1

44. Other Factors Labor = Wage Capital = Interest (that’s it until macro)
Land = Rent
Entrepreneurship- profit

45. Land (Natural Resources)

46. Economic Rent Term originally only applied to land
Payment for land above price necessary for land to be made available
A decrease in the payment for land will not reduce the quantity of land available for rent.

47. Economic Rent- modern
Payment for any factor above price necessary for that factor to be employed
A decrease in the payment for the factor will not reduce the available supply of the factor

48. Economic Rent- in other words
Payment for/to any factor above the payment required by its owner

49. Wage Determinant Productivity
*American worker overseeing mechanized assembly line
*Foreign worker hand painting a decoration

50. Wage Differential
Skills/Knowledge
Limits supply
MRP
Risk
Access

51. Human Capital Investment to improve skills and productivity of labor
Self or Firm
High wage jobs OFTEN include large human capital investments
*Profession/Unions often push for high human capital requirements.