Chapter 10 - Input Demand: The Labor and Land Markets

Question 1

derived demand

Answer 1

The demand for resources (inputs) that is dependent on the demand for the outputs those resources can be used to produce.

Question 2

productivity of an input

Answer 2

The amount of output produced per unit of that input.

Question 3

marginal product of labor (MP(subL))

Answer 3

The additional output produced by 1 additional unit of labor.

Question 4

marginal revenue product (MRP)

Answer 4

The additional revenue a firm earns by employing 1 additional unit of input, ceteris paribus.

Question 5

factor substitution

effect

Answer 5

The tendency of firms to substitute away from a factor whose price has risen and toward a factor whose price has fallen.

Question 6

output effect of a factor price increase (decrease)

Answer 6

When a firm decreases (increases) its output in response to a factor price increase (decrease), this decreases (increases) its demand for all factors.

Question 7

demand-determined

price

Answer 7

The price of a good that is in fixed supply; it is determined exclusively by what households and firms are willing to pay for the good.

Question 8

pure rent

Answer 8

The return to any factor of production that is in fixed supply.

Question 9

technological change

Answer 9

The introduction of new methods of production or new products intended to increase the productivity of existing inputs or to raise marginal products.