Factor/Resource/Input Markets
10%-18% of AP Test
Demand for all inputs is "derived" or originates in the product market
Marginal revenue product-FRQ #2 2010(B)
MRP is a function of the increase in marginal revenue received by the employer for each additional unit of productivity from either an investment in capital, land, and/or labor.
Labor market and firms’ hiring of labor
A firm will hire labor as long as the MRP > Wage (MFC). A profit-maximizing firm would employ a resource up until the MRP(VMP)=MRC (MFC).
MONOPSONY (imperfect competition)-
PERFECTLY COMPETITIVE LABOR MARKET:
Income is distributed to all factors of production from firms to households. Labor makes up approximately 70% of the distribution.