Labour Markets

Question 1

Output markets

Answer 1

Markets where goods + services are exchanged

Question 2

Input markets

Answer 2

Markets where FoPs are exchanged

Question 3

What’re the key inputs to produce Q?

Answer 3

Labour, capital & land

Question 4

Labour

Answer 4

People available for employment to produce output

Question 5

Capital

Answer 5

Machines & equipment used by labour to produce output

Question 6

Land

Answer 6

Site of prod

Question 7

Distinguish between fixed and variable inputs

Answer 7

Fixed = can’t change in SR (machinery)

Variable = can change in SR (labour)

Question 8

When does the law of diminishing returns occur in the SR?

Answer 8

When a firm tries to increase output by applying additional variable inputs to a fixed factor which leads to the marginal unit of the variable factor eventually diminishing

Question 9

Marginal input rule

Answer 9

As long as the firm doesn’t shut down, a firm should employ the no. of units of labour to max profits at point of:

MRP (L) = MC (L)

Question 10

MRP (L)

Answer 10

Change in TR from employing an extra unit of labour

Question 11

MC (L)

Answer 11

Change in TC from employing an extra unit of labour

Question 12

MRP (L) formula?

Answer 12

MR * MPP (L)

Question 13

MPP (L)

Answer 13

How much output the extra unit of labour produces

Question 14

When are labour markets imperfect?

Answer 14

Employees/employers are wage makers

Question 15

Monopsony

Answer 15

Only 1 employer of a certain type of labour

Question 16

Assumption of monopoly union

Answer 16

Workers are wage makers (each worker is member of union, union faces no comp. from outsiders)