ECON 2000 Chapter : Chapter 10 Input Markets
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Document Summary
Two inputs used together may enhance, or complement each other. Marginal product of labor- the additional output produced by one additional unit of labor. Derived demand- the demand for resources (inputs) that is dependent on the demand for the outputs those resources can be used to produce. Productivity of an input- the amount of output produced per unit of that input. A firm demands inputs if and only if households demand the good or service provided by that firm. Marginal revenue product- the additional revenue a firm earns by employing 1 additional unit of input, ceteris paribus. As long as marginal revenue is greater than the wage, the firm can keep hiring workers. A firm employing two variable factors of production in the short and long run. In firms employing just one variable factor of production, a change in the price of that factor affects only the demand for the factor itself.
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Related Questions
The law of eventually diminishing marginal returns: (Points : 1)
a. states that each and every increase in the amount of the variable factor employed in the production process will yield diminishing marginal returns.
b. is a mathematical theorem that can be logically proved or disproved
c. is the rate at which one input may be substituted for another input in the production process
d. None of the above
b. the incremental change in total output that can be produced by the use of one more unit of the variable input in the production process c. the percentage change in output resulting from a given percentage change in the amount of the variable input X employed in the production process with Y d. None of the above |
b. the marginal rate of technical substitution c. equal to MPx/MPy d. all of the above e. none of the above |
b. equal to the marginal factor cost of the variable factor times the marginal revenue resulting from the increase in output obtained c. equal to the marginal product of the variable factor times the marginal product resulting from the increase in output obtained d. a and b e. a and c |
b. variable cost c. marginal rate of technical substitution d. total cost e. none of the above |
b. the average product of labor (L) is equal to ?2 c. if the amount of labor input (L) is increased by 1 percent, then output will increase by ?1 percent d. a and b e. a and c |
b. relevant to decisions in which one or more inputs to the production process are fixed c. not relevant to optimal pricing and production output decision facilities d. crucial in making optimal investment decisions in new production facilities e. none of the above |
b. all inputs are considered variable c. some inputs are always fixed d. capital and labor are always combined in fixed proportions |
A linear total cost function implies that: (Points : 1) |
b. average total costs are continually decreasing as output increases
c. a and b
d. none of the above
Match the following.
constant-cost industry | A market structure in which a large number of firms sell a homogenous product or service with no restrictions on entry or exit and each firm is a price-taker. |
increasing-cost industry | The demand facing a price-taking firm. |
long-run equilibrium | A firm produces zero output but must still pay its fixed costs. |
marginal revenue product | Price below which a firm shuts down in the short run. |
perfect competition | All firms produce where price equals long-run marginal cost, and economic profits are zero. |
perfectly elastic demand | Industry in which input prices rise as all firms in the industry expand output. |
shut down | Industry in which input prices remain constant as all firms in the industry expand output. |
the shut-down price | The additional revenue earned by hiring one more unit of a variable input. |