ECN 104 Chapter Notes - Chapter 18: Opportunity Cost, Farmer Jack, Market Power
22 Oct 2012
School
Department
Course
Professor
Document Summary
Factors of production and factor markets: factors of production: the inputs used to produce goods and services. Demand for a factor of production is a derived demand derived from a firm"s decision to supply a good in another market: two assumptions, 1. The typical firm is a price taker. In the market for the product it produces. We assume that firms care only about maximizing profits. If the benefit from hiring another worker exceeds the cost, jack will hire that worker. The wage the price of labour: cost of hiring another worker, benefit of hiring another worker, the size of this benefit depends on jack"s production function: the. Mpl = (change in output) / (change in labour: the value of the marginal product, problem: Cost of hiring another worker (wage) is measured in dollars. Benefit of hiring another worker (mpl) is measured in units of output: solution, value of the marginal product: the marginal product of an input.
