Mr. Maurer
AP Economics
Name: _______________________
Factor Market Review (Chapters 14 & 15)
Vocabulary you absolutely must know: average product marginal product (marginal physical product) capital marginal revenue derived demand employ (both people and resources) employment (of both people and resources) factor marginal revenue product nominal wage rate resource total product input marginal cost total resource cost wage rate marginal factor cost (marginal resource cost)
Concepts you must know and be able to apply
The least-cost rule for the combination of resources _______________________________________
The profit-maximizing rule for the employment of resources _________________________________
Perfectly competitive labor markets
- Labor supply and demand curves for the firm and for the industry.
- Equilibrium wage and number of workers.
- Effects of changes in supply of labor and demand for labor on the labor market.
- Effects of minimum wage on labor market equilibrium.
- Calculate the elasticity of demand in the labor market.
- Explain the effect that elastic or inelastic demand will have on changes in hiring when wage rates change.
- Be able to draw side by side graphs of both the industry and a single firm in a competitive labor market.
Graphs should show: labor supply and demand curves, wage rate, and employment level for both the industry and the firm. You should be able to demonstrate the effect of changes in the demand for or supply of labor and the effects of an effective minimum wage on your diagram.
Monopsonistic labor markets
- Labor supply and demand curve for the monopsony.
- Wage rate and its relationship to marginal factor cost.
- How is number of workers and wage rate set in monopsony?
- Be able to draw a graph of a monopsonistic labor market, including labor supply, labor demand, marginal revenue product, marginal factor cost, and the wage rate and employment level set by the monopsony.
If you are not totally comfortable with all of the vocabulary and concepts above, you need to go back and get comfortable with them. Write definitions for any terms you don’t know. Practice those concepts you’re not familiar with. Ask questions and have these things explained to you.