Wage determination in a perfectly competitive labour market
Cards (20)
- What are the two key assumptions made about the markets in which firms operate?
- What does it mean for firms to be price takers and wage takers?
- What hourly wage is assumed to be set by the labor market?
- What market condition is assumed in the short run for the firm?
- What happens to total physical product and marginal physical product as workers increase?
- What is the formula for MRP (marginal revenue product)?
- Why is price equal to marginal revenue in a perfectly competitive product market?
- If the marginal physical product of a worker is 5 and the price is £10, what is the MRP?
- Where do wages come from in a competitive labor market?
- What do the supply and demand curves in the labor market represent?
- What determines the equilibrium wage rate in the labor market?
- For an individual firm, what is the relationship between the wage rate, average cost of labor, and marginal cost of labor?
- For an individual firm, what does the demand curve represent?
- What condition do firms use to maximize revenue from workers?
- How do firms make efficient employment decisions in a perfectly competitive labor market?
- If the wage rate is £20, how many workers should the firm hire based on the provided data?
- Why is it not efficient to hire workers beyond the point where MRP equals the wage rate?
- Why should firms continue to hire workers up to the point where MRP equals the wage rate?
- Where is the wage rate set in the market?
- What diagram is key to understanding wage determination and employment decisions?