Micro Study Guide - Unit 5 PDF

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AP® Microeconomics Unit 5: Factor Markets Topic 5.1- Introduction 1. What is the difference between the factor market and the product market?

3. What is derived demand? 4. Why is the demand for labor downward-sloping?

2. What are the four factors of production?

5. Why is the supply for labor upward-sloping?

3. What are the four factor payments? Topic 5.2- Changes in Factor Demand and Supply 1. Draw a competitive market for plumbers. 3. What shifts the demand for labor? Label the equilibrium wage and quantity

4. What shifts the supply for labor?

2. Assume the government establishes a certification process that makes it harder to be a plumber. Show what happens on the graph. 6. Draw the results of a minimum wage. Label the quantity supplies (Qs) and the quantity demanded (Qd) Wage

5. If the equilibrium wage for electricians is $15 an hour and the government established a minimum wage of $10 an hour, what will happen to the wage and quantity? Explain.

7. If the demand for houses increases, the wage of carpenters will ____ and the quantity will ____. 8. Assume bricks and wood are substitute resources. If the price of bricks increases, the price of wood _____ and the quantity _____. 9. If the government removes all regulations for becoming a dentist. The wages for dentists will ____ and the quantity will _____. 10. If demand for accountants falls at the same time that the supply increases, the wage will ____ and the quantity will ______________. 11. Will a binding minimum wage lead to relatively less unemployment when the demand for labor is inelastic or when it is elastic? Explain.

Quantity of Labor Do not post online. © Copyright Jacob Clifford, ACDC Leadership, 2019

Topic 5.3- Perfectly Competitive Factor Markets 1. Define marginal revenue product (MRP) 2. Define marginal resource cost (MRC)

3. Assume perfectly competitive product and labor markets. If the price of the product is $5 and the wage is $20, how many workers should be hired? 4. How much is the profit or loss? 5. Assume that this firm develops a process that makes only their workers more productive. The wage will ______________ and the quantity will _______________.

Number of Workers

Total Product

Marginal Product

0 1 2 3 4 5

0 5 13 18 21 20

-

Marginal Revenue Product -

6. Draw side-by-side graphs showing a perfectly competitive market and firm hiring workers Wage

Market

Wage

Quantity

Firm

Quantity

Topic 5.4- Monopsonistic Markets 1. Draw a monopsony and label the unregulated wage and quantity

7. If the government sets a binding minimum wage, will the MRP of the last worker hired increase, decrease, or stay the same?

Wage

8. What is the least cost rule when combing resources? 9. Assume the firm hires the cost-minimizing combination of labor and capital. The marginal product of the last worker is 60 units and the marginal product of the last unit of capital is 20 units. If the wage rate is $30 per hour, what is the price of capital?

Quantity 2. What are the characteristics of a monopsony?

10. Assume that the price of labor falls to $10 per hour. The company should ____ the number of workers and ____ the amount of capital.

Do not post online. © Copyright Jacob Clifford, ACDC Leadership, 2019...