Chapter 15 Flashcards
(27 cards)
perfect competitive
Definition of Value of marginal product (VMP)
The value at current market price of the extra output produced by an additional unit of input
( VMP_L = P x MP_L )
imperfect competitor
Definition of marginal revenue product of labour (MRP_L)
The amount by which total revenue increases with the employment of an additional unit of input
( MRP_L = deltaQ/deltaL * deltaTR/deltaQ = deltaTR / deltaL )
Definition of Average factor cost
Another name for the supply curve for an input
Definition of total factor cost (TFC)
The product of the employment level of an input and it’s average factor cost
Definition of marginal factor cost (MFC)
The amount by which total factor cost changes with the employment of an additional unit of input
If a firm is employing 0 units of capital it would imply that the labor is…
…Cheap! (stop being a dumbass)
In a perfectly competitive firm the short run demand for labour is…
…downward sloping because of the law of diminishing returns
The question of how many hrs shld I work can be answered with…
An indifference map. Of income and leisure time!
Why ain’t leisure a Giffen good
If the labour supply curve is backward bending, leisure can NOT be an inferior good and since
Only inferior goods are giffen goods leisure cannot be a Giffen good
Wuz the goal of welfare choom????
The goal of welfare is to provide addition eddies (income) to the chooms that won’t doin too good (the poor)
value of marginal product (VMP)
the value, at current market price, of the extra output produced by an additional unit of input.
monopsonist
a monopsonist is the sole buyer of labour in a market
average factor cost (AFC)
another name for the supply curve for an input.
total factor cost (TFC)
the product of the employment level of an input and its average factor cost
marginal revenue product (MRP)
the amount by which total revenue increases with the employment of an additional unit of input.
MRPL = WHAT
(Delta Q / Delta L ) X (Delta TR / Delta Q) = MPL x MR
How much labor will a firm, that faces a downward sloping demand curve for its output, hire
The quantity for where its wage rate and MRPL are EQUAL
Can think of wage rate as
the demand curve for labour
The hiring rule for a firm is to…
employ extra labour until the wage rate is equal to VMPL
A firm that hires labour in a perfectly competitive market faces a supply curve of labour that is a…
Horizontal straight line
The monopolist’s demand curve for labour is his
marginal revenue product curve
The hiring rule for a firm in a perfectly competitve market is to…
employ until the wage rate is equal to VMPL
or equate its labour demand to its AFC
The hiring rule for a firm with a downward sloping demand is to…
Equate the wage rate to MRPL
An increase in the wage rate:
increases the opportunity cost of leisure.
