The Demand for Labor
This concept states that the demand for a resource like labor is determined by the demand for the product that the resource produces
What is Derived Demand?
In this market structure, a firm is a "wage taker" and can hire all the workers it wants at the market-clearing wage.
What is a Perfectly Competitive Labor Market?
This occurs when the production or consumption of a good imposes an unintended cost on a third party.
What is a Negative Externality?
These two characteristics define a pure public good
What are Non-excludability and Non-rivalry?
This rule states that a firm minimizes total cost by equating the ratio of Marginal Product to the price of the factor for all inputs.
What is the Least-Cost Rule?
Calculated by multiplying Marginal Product by the Price of the product (in a perfectly competitive product market).
What is Marginal Revenue Product (MRP)?
The individual firm's labor supply curve in a perfectly competitive factor market is perfectly elastic and horizontal at this level.
What is the Market Wage?
The level of output where Marginal Social Benefit equals Marginal Social Cost.
What is the Socially Optimal Quantity?
This problem occurs when individuals have no incentive to pay for a public good because they cannot be excluded from consuming it.
What is the Free-Rider Problem?
If a firm's MRP is $20 and the wage is $15, the firm should take this action.
What is Hire More Workers?
The change in a firm's total cost when it hires one additional worker.
What is Marginal Resource Cost (MRC)?
RANDOM BONUS: To earn these points, you must stand on one leg and recite the definition of "Oligopoly" in a robot voice.
That was... something!
To correct a negative externality, the government can implement this type of per-unit charge on producers.
What is a Concise Tax?
A good that is rival in consumption but non-excludable, such as fish in the ocean.
What is a Common Resource?
This is the formula for the "Least-Cost" combination of Labor (L) and Capital (K).
What is MP of Labor / Price of Labor = MP of Capital / Price of Capital?
A firm will continue to hire workers as long as this value is greater than or equal to the Marginal Resource Cost.
What is Marginal Revenue Product?
A market with only one buyer of labor.
What is a Monopsony?
This exists when the Marginal Social Benefit of a good is greater than the Marginal Private Benefit.
What is a Positive Externality?
The tendency for common resources to be overused and depleted because no one owns them.
What is the Tragedy of the Commons?
In a perfectly competitive product market, if the price of the good is $5 and the Marginal Product of the 4th worker is 10 units, this is the worker's MRP.
What is $50?
This law explains why the Marginal Product—and therefore the MRP—eventually decreases as more workers are hired.
What is the Law of Diminishing Marginal Returns?
In a monopsony, this curve is located above the labor supply curve because the firm must raise the wage for all workers to hire one more.
What is the Marginal Resource Cost (MRC) curve?
This theorem suggests that if property rights are well-defined and transaction costs are low, private parties can reach an efficient solution to externalities without government intervention.
What is the Coase Theorem?
To calculate the market demand for a public good, you must perform this type of summation of individual willingness-to-pay.
What is sum all individual demand?
If a monopsonist hires 5 workers at $10 each and must pay $12 to hire a 6th worker, this is the MRC of the 6th worker.
What is $22?