Chapter 18 - The Markets for Factors of Production

Question 1

Factors of Production

Answer 1

• the inputs used to produce goods and services
• Land, Labour, Capital (equipment and structures used to produce goods/services)
• prices of inputs determined by supply/demand market factors

Question 2

Derived Demand

Answer 2

• Markets for Factors of Production are like markets for goods & services except…
• demand for a Factor of Production is a Derived Demand: derived from a firm’s decision to supply a good in another market

Question 3

Marginal Product of Labour (MPL)

Answer 3

• change in output / change in labour

Question 4

Value of a Marginal Product (VMPL)

Answer 4

• the marginal product on an input times the price of the output

Question 5

Diminishing Marginal Product

Answer 5

• A decreasing Marginal Product of Labour

Question 6

Profit Maximization and Labour

Answer 6

• maximize profit by making VMPL = W

Question 7

Shifts in Labour Demand Curve

Answer 7

• Changes in output price P
• Technological Change
• The Supply of other Factors of Production