Theme 3 (MR STEEDS)

Question 1

What is the formula for marginal revenue product of labour (MRPL)?

Answer 1

Marginal product of labour x marginal revenue

Question 2

What are some factors influencing the demand for labour?

Answer 2

• wage rate
• demand for products
• productivity of labour
• profitability of firms

Question 3

What are some factors influencing the supply for labour?

Answer 3

• wage rate
• size of working population
• preferences
• migration

Question 4

What are some factors influencing the BACKBEND supply for labour?

Answer 4

• length of training of workers
• barriers to entry
• trade unions
• tax and benefits

Question 5

What are some advantages of increasing minimum wage?

Answer 5

• reduced poverty
• increased consumer spending
• improved worker productivity

Question 6

What are some disadvantages of increasing minimum wage?

Answer 6

• redundancies
• cost push inflation
• reduced competitiveness
• increased prices

Question 7

What are some advantages of decreasing minimum wage?

Answer 7

• increased employment
• reduced labour cost
• attracting foreign investment

Question 8

What are some disadvantages of decreasing minimum wage?

Answer 8

• reduced worker income
• decreased consumer spending
• lower productivity and incentives

Question 9

What can trade unions help to do?

Answer 9

• cause higher wages
• increase productivity by bringing in new working practices

Question 10

What are the characteristics of perfect competition?

Answer 10

• large number of firms
• products are homogeneous
• freedom of entry and exit
• firms are price takers
• consumers/producers have perfect knowledge

Question 11

What are some examples of perfect competition?

Answer 11

• local farmers market
• stock market

Question 12

What are some characteristics of monopoly?

Answer 12

• one firm
• huge barriers of entry and exit
• firms are price setters
• provide for the whole market
• producers have perfect knowledge, where consumers don’t

Question 13

What are some advantages of perfect competition?

Answer 13

• lower prices due to intense competition
• efficient resource allocation
• increased consumer choice

Question 14

What are some disadvantages of perfect competition?

Answer 14

• lack of innovation
• limited economies of scale
• lack of product differentiation

Question 15

What are some advantages of monopoly?

Answer 15

• benefits from economies to scale
• keep pricing consistent and reliable for consumers

Question 16

What are some disadvantages of monopoly?

Answer 16

• higher prices
• reduced product quality and choice
• decreased innovation
• inefficient

Question 17

What are some conditions of price discrimination?

Answer 17

• firm must operate in imperfect competition (price maker with downwards sloping demand curve)
• firm must be able to separate markers and prevent resale
• different consumer groups must have different price elasticities of demand

Question 18

What are some advantages of price discrimination?

Answer 18

• firms will be able to increase revenue
• increased revenue may be used for research and development
• some consumers will benefit from lower prices

Question 19

What are some disadvantages of price discrimination?

Answer 19

• some consumers will pay higher prices (may be the poorest)
• decline in consumer surplus

Question 20

What are some characteristics of monopolistic competition?

Answer 20

• large number of firms
• may have some control over price as they differentiate their product
• few barriers to entry and exit
• consumer and producers have perfect knowledge is imperfect

Question 21

What are some advantages of monopolistic competition?

Answer 21

• great variety of products and services
• higher quality of products
• consumers are informed about goods and services available in the market

Question 22

What are some disadvantages of monopolistic competition?

Answer 22

• higher prices
• inefficiency
• lack of economies to scale