ch 28

The derived demand for an input

Applies in every labor market

T/F: The marginal revenue curve for a monopolist always lies above the downward-sloping product demand curve

False

T/F: To minimize total costs for a particular rate of production, the firm will hire factors of production up to the point at which the marginal product per last dollar spent on each factor of production is equalized

False

A perfectly competitive firm determines that its MRP of labor divided the wage = 1.2. This firm should

Hire more labor. Profit maximization requires that MRP = W or, alternatively, MRP/W = 1. if MRP/W = 1.2, the firm should expand employment. As it does the MRP will decline to equal the wage.

Derived demand

Input factor demand derived from demand for the final product being produced

The demand for law professors is determined by the

Legal training they provide per teaching unit and the tuition rate

Because _____ & ________ _______ are the same for a perfectly competitive firm, the VMP & MRP are the same for such a firm

Price, marginal revenue

Marginal Factor Cost

The cost of using an additional unit of an input. =Change in total cost / Change in amount of resource used For ex, if a firm can hire all the workers it wants at the going wage rate, the marginal factor cost of labor is that wage rate

What does the Marginal Revenue Product (MRP) represent?

The incremental worker's contribution to the firm's total revenues

Marginal revenue product (MRP)

The marginal product (MP) x marginal revenue (MR). The MRP gives the additional revenue obtained from a one-unit change in labor input.

Value of Marginal Product (VMP)

The marginal product x the product price

T/F: If a perfectly competitive industry in the output market suddenly came one in which there is monopoly in the output market, the amount of employment would fall

True

If the MRP of labor is less than the wage rate, the perfectly competitive firm will

decrease employment

A new education program administered by the company increases labor's marginal product. The demand for labor would

increase

The firm completes a new plant with a larger workspace and new machinery. The demand for labor would

increase

For a monopolist, marginal revenue:

is less than the price

When a firm sells its output in a monopoly market, marginal revenue is ____ than price

less

To maximize profits, the _______ _______ product of each resources must equal the resource's _____

marginal revenue, price

The minimize total costs for a given output, the profit-maximizing firm will hire each factor of production up to the point at which the ________ product per last dollar spent on each factor is equal to the ________ product per last dollar spend on each of the factors of production

marginal, marginal

Just as the MRP is the perfectly competitive firm's input demand curve, the MRP is also the ___________ input demand curve

monopolist's

The profit-maximizing combination of factors will occur when each factor is used up to the point at which its MRP is equal to its unit _____

price

The decrease in the market clearing tuition rate has

reduced law schools' demand for law professors

A profit maximizing firm will hire inputs in combinations

such that the marginal physical product per last dollar spent on each factor of production is equalized