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27 Cards in this Set
- Front
- Back
Marginal Factor cost (mfc) |
addition to total cost when one additional unit of an output is employed |
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marginal revenue product (mrp) |
addition to total revenue when one additional unit of an unput ( such as labor) is employed |
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monopsony |
input buyer that faces a higher input price as it employs more inputs |
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price taker and price searcher in output market |
a perfectly competitive firm can increase output and still sell it at the same price. |
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price searcher in an input market |
employ only a small fraction of the total workforce- majority of a factor market are competitive. |
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output effect |
when machines higher price raises the cost and price of output which in turn reduces output demand. |
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substitution effect |
when labor and machinery are substitute then the firm to produce a given amount of output will use more labor and less machinery |
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elastic by input demand |
finding the perfectage of labor demand go down when wages go up by 1 percent %change in quantity of input demanded by % change in inputs price. |
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marginal revenue product (MRP) |
is the additional total revenue due to employing an additional unit of an input |
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marginal factor cost (MFC) |
is the additional to total cost due to employing an additional unit of an input |
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the maximize profit of a firm is when |
by hiring until MRP=MFC |
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for price takers |
MRP= P X MPP |
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for a price searcher |
MRP = MR X MPP |
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for a price taker |
MRP declines as the firm hires more because of diminishing MPP. for a price searcher, MRP declines even more bc besides falling MPP, its MR also falls as it hires more |
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for both price takers and price searchers |
the marginal revenue product schedule is the demand scheduele for the input |
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facor shifting the derived demand for an input |
price of complementary input price up - decrease price down - increase |
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the demand curve for an input is shifted by changes in the demand for output |
by changes in the price of other inputs and by changes in productivity |
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when inputs goes down more when its prices rises |
its demand is more elastic |
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when the quantity of an input demanded is insensitive to price change |
its demand is inelastic |
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a price searcher in its output market can be a price taker in its input marker |
n |
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for price takers in the input market |
MFC= Price of Inputs |
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for a price searcher in the input market |
MFC=Price of inputs plus added cost of paying higher wages to already inputs |
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for the price searcher |
MFC> price of inputs |
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when firms are price takers in both the market |
they sell in and the markets they buy factors in inputs will be allocated to their most valued use |
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firms will hire inputs untill the marginal physical product of each per dollar cost is the same |
this will give it the most output for a given cost (and equivalently, the least cost for a given output) |
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when all factors are paid |
their marginal value (p x MPP) total revenue will equal total costs in the long run |
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the surplus of each factor will be the income of other factors |
and vice cersa |