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What is the difference between diminishing returns and negative returns?
Diminishing returns: Output increases at a decreasing rate. Negative returns: Total output decreases.
What is the difference between Marginal Product (MP) and Marginal Revenue Product (MRP)?
MP is the additional output from one more worker. MRP is the additional revenue from that worker (MP * Price).
Compare the product market and the factor market.
In the product market, households demand goods/services and firms supply them. In the factor market, firms demand resources (factors of production) and households supply them.
What is the impact of a minimum wage law on employment?
If set above the equilibrium wage, it can lead to a decrease in employment (unemployment).
How does a payroll tax affect the labor market?
It increases the cost of hiring workers, potentially decreasing labor demand and wages.
What is the impact of occupational licensing on the supply of labor?
It restricts the supply of labor in that occupation, potentially increasing wages for those licensed.
How do government subsidies for education affect the labor market?
They can increase the supply of skilled labor, potentially decreasing wages for those skills in the long run.
What is a factor market?
Market where businesses buy factors of production (land, labor, capital, entrepreneurship) from households.
Define 'derived demand'.
Demand for a resource that is derived from the demand for the product it helps create.
What is Marginal Resource Cost (MRC)?
The cost of hiring one more unit of a resource. For labor, it's the wage rate.
Define Marginal Product (MP).
The additional product produced by hiring one more worker.
What is Marginal Revenue Product (MRP)?
The additional revenue generated by hiring one more worker. Calculated as MP * Price.
What is Total Product (TP)?
The total amount of product produced by a certain number of workers.
What is the Law of Diminishing Marginal Returns?
As you add more of a variable resource to a fixed resource, the extra output from each new input will eventually decrease.
Define 'rent' in the context of factor markets.
Payment for the use of land, a factor of production.
Define 'wage' in the context of factor markets.
Payment for labor, a factor of production.
Define 'interest' in the context of factor markets.
Payment for the use of capital, a factor of production.
Define 'profit' in the context of factor markets.
Payment to entrepreneurship, a factor of production.