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Micro Chapter 16

QuestionAnswer
Significance of Resource Pricing (MiCRP) Money-income determination Cost minimization Resource allocation Policy issues
Derived Demand for Resources Assume perfect competition: P____ markets R____ markets Product markets Resource markets
Derived demand for resources depends on: ___ ___ of the resource ___ of the product it produces Marginal product of the resource (MP) Price of the product it produces (P)
Marginal Revenue Product (MRP) Δ TR / Δ in Resource Quantity
Marginal Resource Cost (MRC). Δ TC / Δ in Resource Quantity
MRP = MRC Rule hire additional resources as long as the additional product produced adds more to... MRC is exactly equal to ___ ____ the revenues than to costs MRP schedule equals the firm’s demand for labor. MRC is exactly equal to wage rate.
Determinants of Resource Demand (1 of 2) Changes in... Changes in product demand Changes in productivity: -Quantities of other resources -Technological advance -Quality of the variable resource
Determinants of Resource Demand (2 of 2) Changes in the price of ______ and _______ resources Changes in price of substitute resources: -Substitution effect -Output effect -Net effect Changes in the price of complementary resources
Rising employment in health and fitness services: Nurse practitioners Exercise trainers Group fitness instructors
Declining employment: Telephone operators Parking enforcement workers
What combination of resources will maximize profit? Profit-maximizing combination of resources: Profit maximizing rule.
Least-Cost Rule Minimize cost of... Minimize cost of producing a given output.
(Least-Cost Rule) Last dollar spent on each resource yields the same marginal product: MPL / PL = MPc / Pc MPL= marginal product of labor PL= price of labor MPc = marginal product of capital Pc = price of capital
(Profit-Maximizing Rule) Each resource is employed to the point where its MRP is equal to its price: MRPL = PL and MRPc = Pc MRPL / PL = MRPc / Pc = 1
Income Distribution Marginal productivity theory of income distribution.
(Income Dist.) Paid according to value of service: ____ Resource _____ Workers Resource owners
(Income Dist.) Inequality: Productive resources unequally distributed: Market ____ Market imperfections
Last Word: Labor and Capital: Substitutes or Complements? Banks will use the ___ ___ ___ of resources Banks will use the least cost combination of resources.
Derived demand: the demand for one product or service is influenced by the demand for another
Created by: Phillies55
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