Howdo factors of production are traded in factor market, determining the factor distribution of income? Concept: Factor of production: The resources used byproducers to produce product and services. For example, land, labour, physical and human capital. Factor distribution of income: The way the total income of the economy is divided among factor of production such as labour, land and capital. Marginal Productivity Income Theory- Marginal productivity income theory explains that the factor of production sold in factor market is paid its equilibrium value of the marginal product. In other words, it refers to the additional value created by using the last unit of that factorin the factor market.

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Answer 1

Question

Chapter 19, Problem aWYWL

To determine

Howdo factors of production are traded in factor market, determining the factor distribution of income?

Concept:

Factor of production: The resources used byproducers to produce product and services. For example, land, labour, physical and human capital.

Factor distribution of income: The way the total income of the economy is divided among factor of production such as labour, land and capital.

Marginal Productivity Income Theory- Marginal productivity income theory explains that the factor of production sold in factor market is paid its equilibrium value of the marginal product. In other words, it refers to the additional value created by using the last unit of that factorin the factor market.

Expert Solution & Answer

Explanation of Solution

A competitive profit-maximizing firm demands each factor of production till the factor’s marginal product equals its factor price. We analyze a firm’s demand for labor to answer this question. The marginal product of labor(MP_L₎is the extra output produced by the firm by hiring one more unit labour, keeping the amount of capital constant.

Therefore, MP_L=f(L+1,K)-f(L,K)

In making its decision, a profitprofit-maximizing firm(assuming it takes the price as given) will hire the labor until the MP_Lis equal to the real wage rate.

This is seen as follows:

Additional revenue (R)depends on MP_L and the price of the good (P). But the firm also incurs additional cost(C) which is the wage rate. So, a firm will hire only to the point where Marginal Revenue=Marginal Cost.

i.e. P*MP_L=W

(MP_L=W/P), where wages and price are exogenously given.

EBK MICROECONOMICS, Chapter 19, Problem aWYWL

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The accompanying graph shows the short-run demand and cost situation for a price searcher in a market with low barriers to entry. Price (dollars) 24 8 MC ATC MR 30 D 45 50 Quantity/time The firm will maximize its profit at a quantity of units. After choosing the profit maximizing quantity, the firm will charge a price of The firm will receive $ in revenue at the profit-maximizing quantity. The total cost of production for this profit-maximizing quantity is S The maximum profit the firm can earn in this situation is $ per unit for this output. How will the situation change over time? Profits will attract rival firms into the market until the profit-maximizing price falls to the level of per-unit cost. ◇ Losses will induce firms to leave this market until the profit maximizing price falls to zero. The market will adjust until the price charged by this firm no longer exceeds marginal cost at the profit-maximizing quantity. This market is already in long-run equilibrium, and will not…

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Answer 2

Question

Chapter 19, Problem aWYWL

To determine

Howdo factors of production are traded in factor market, determining the factor distribution of income?

Concept:

Factor of production: The resources used byproducers to produce product and services. For example, land, labour, physical and human capital.

Factor distribution of income: The way the total income of the economy is divided among factor of production such as labour, land and capital.

Marginal Productivity Income Theory- Marginal productivity income theory explains that the factor of production sold in factor market is paid its equilibrium value of the marginal product. In other words, it refers to the additional value created by using the last unit of that factorin the factor market.

Expert Solution & Answer

Explanation of Solution

A competitive profit-maximizing firm demands each factor of production till the factor’s marginal product equals its factor price. We analyze a firm’s demand for labor to answer this question. The marginal product of labor(MP_L₎is the extra output produced by the firm by hiring one more unit labour, keeping the amount of capital constant.

Therefore, MP_L=f(L+1,K)-f(L,K)

In making its decision, a profitprofit-maximizing firm(assuming it takes the price as given) will hire the labor until the MP_Lis equal to the real wage rate.

This is seen as follows:

Additional revenue (R)depends on MP_L and the price of the good (P). But the firm also incurs additional cost(C) which is the wage rate. So, a firm will hire only to the point where Marginal Revenue=Marginal Cost.

i.e. P*MP_L=W

(MP_L=W/P), where wages and price are exogenously given.

EBK MICROECONOMICS, Chapter 19, Problem aWYWL

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Answer 3

Question

Chapter 19, Problem aWYWL

To determine

Howdo factors of production are traded in factor market, determining the factor distribution of income?

Concept:

Factor of production: The resources used byproducers to produce product and services. For example, land, labour, physical and human capital.

Factor distribution of income: The way the total income of the economy is divided among factor of production such as labour, land and capital.

Marginal Productivity Income Theory- Marginal productivity income theory explains that the factor of production sold in factor market is paid its equilibrium value of the marginal product. In other words, it refers to the additional value created by using the last unit of that factorin the factor market.

Expert Solution & Answer

Explanation of Solution

A competitive profit-maximizing firm demands each factor of production till the factor’s marginal product equals its factor price. We analyze a firm’s demand for labor to answer this question. The marginal product of labor(MP_L₎is the extra output produced by the firm by hiring one more unit labour, keeping the amount of capital constant.

Therefore, MP_L=f(L+1,K)-f(L,K)

In making its decision, a profitprofit-maximizing firm(assuming it takes the price as given) will hire the labor until the MP_Lis equal to the real wage rate.

This is seen as follows:

Additional revenue (R)depends on MP_L and the price of the good (P). But the firm also incurs additional cost(C) which is the wage rate. So, a firm will hire only to the point where Marginal Revenue=Marginal Cost.

i.e. P*MP_L=W

(MP_L=W/P), where wages and price are exogenously given.

EBK MICROECONOMICS, Chapter 19, Problem aWYWL

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Answer 4

Question

Chapter 19, Problem aWYWL

To determine

Howdo factors of production are traded in factor market, determining the factor distribution of income?

Concept:

Factor of production: The resources used byproducers to produce product and services. For example, land, labour, physical and human capital.

Factor distribution of income: The way the total income of the economy is divided among factor of production such as labour, land and capital.

Marginal Productivity Income Theory- Marginal productivity income theory explains that the factor of production sold in factor market is paid its equilibrium value of the marginal product. In other words, it refers to the additional value created by using the last unit of that factorin the factor market.

Expert Solution & Answer

Explanation of Solution

A competitive profit-maximizing firm demands each factor of production till the factor’s marginal product equals its factor price. We analyze a firm’s demand for labor to answer this question. The marginal product of labor(MP_L₎is the extra output produced by the firm by hiring one more unit labour, keeping the amount of capital constant.

Therefore, MP_L=f(L+1,K)-f(L,K)

In making its decision, a profitprofit-maximizing firm(assuming it takes the price as given) will hire the labor until the MP_Lis equal to the real wage rate.

This is seen as follows:

Additional revenue (R)depends on MP_L and the price of the good (P). But the firm also incurs additional cost(C) which is the wage rate. So, a firm will hire only to the point where Marginal Revenue=Marginal Cost.

i.e. P*MP_L=W

(MP_L=W/P), where wages and price are exogenously given.

EBK MICROECONOMICS, Chapter 19, Problem aWYWL

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Answer 5

Chapter 19, Problem aWYWL

To determine

Howdo factors of production are traded in factor market, determining the factor distribution of income?

Concept:

Factor of production: The resources used byproducers to produce product and services. For example, land, labour, physical and human capital.

Factor distribution of income: The way the total income of the economy is divided among factor of production such as labour, land and capital.

Marginal Productivity Income Theory- Marginal productivity income theory explains that the factor of production sold in factor market is paid its equilibrium value of the marginal product. In other words, it refers to the additional value created by using the last unit of that factorin the factor market.

Expert Solution & Answer

Explanation of Solution

A competitive profit-maximizing firm demands each factor of production till the factor’s marginal product equals its factor price. We analyze a firm’s demand for labor to answer this question. The marginal product of labor(MP_L₎is the extra output produced by the firm by hiring one more unit labour, keeping the amount of capital constant.

Therefore, MP_L=f(L+1,K)-f(L,K)

In making its decision, a profitprofit-maximizing firm(assuming it takes the price as given) will hire the labor until the MP_Lis equal to the real wage rate.

This is seen as follows:

Additional revenue (R)depends on MP_L and the price of the good (P). But the firm also incurs additional cost(C) which is the wage rate. So, a firm will hire only to the point where Marginal Revenue=Marginal Cost.

i.e. P*MP_L=W

(MP_L=W/P), where wages and price are exogenously given.

EBK MICROECONOMICS, Chapter 19, Problem aWYWL

Answer 6

Chapter 19, Problem aWYWL

To determine

Howdo factors of production are traded in factor market, determining the factor distribution of income?

Concept:

Factor of production: The resources used byproducers to produce product and services. For example, land, labour, physical and human capital.

Factor distribution of income: The way the total income of the economy is divided among factor of production such as labour, land and capital.

Marginal Productivity Income Theory- Marginal productivity income theory explains that the factor of production sold in factor market is paid its equilibrium value of the marginal product. In other words, it refers to the additional value created by using the last unit of that factorin the factor market.

Expert Solution & Answer

Explanation of Solution

A competitive profit-maximizing firm demands each factor of production till the factor’s marginal product equals its factor price. We analyze a firm’s demand for labor to answer this question. The marginal product of labor(MP_L₎is the extra output produced by the firm by hiring one more unit labour, keeping the amount of capital constant.

Therefore, MP_L=f(L+1,K)-f(L,K)

In making its decision, a profitprofit-maximizing firm(assuming it takes the price as given) will hire the labor until the MP_Lis equal to the real wage rate.

This is seen as follows:

Additional revenue (R)depends on MP_L and the price of the good (P). But the firm also incurs additional cost(C) which is the wage rate. So, a firm will hire only to the point where Marginal Revenue=Marginal Cost.

i.e. P*MP_L=W

(MP_L=W/P), where wages and price are exogenously given.

EBK MICROECONOMICS, Chapter 19, Problem aWYWL

Answer 7

Chapter 19, Problem aWYWL

To determine

Howdo factors of production are traded in factor market, determining the factor distribution of income?

Concept:

Factor of production: The resources used byproducers to produce product and services. For example, land, labour, physical and human capital.

Factor distribution of income: The way the total income of the economy is divided among factor of production such as labour, land and capital.

Marginal Productivity Income Theory- Marginal productivity income theory explains that the factor of production sold in factor market is paid its equilibrium value of the marginal product. In other words, it refers to the additional value created by using the last unit of that factorin the factor market.

Answer 8

Expert Solution & Answer

Explanation of Solution

A competitive profit-maximizing firm demands each factor of production till the factor’s marginal product equals its factor price. We analyze a firm’s demand for labor to answer this question. The marginal product of labor(MP_L₎is the extra output produced by the firm by hiring one more unit labour, keeping the amount of capital constant.

Therefore, MP_L=f(L+1,K)-f(L,K)

In making its decision, a profitprofit-maximizing firm(assuming it takes the price as given) will hire the labor until the MP_Lis equal to the real wage rate.

This is seen as follows:

Additional revenue (R)depends on MP_L and the price of the good (P). But the firm also incurs additional cost(C) which is the wage rate. So, a firm will hire only to the point where Marginal Revenue=Marginal Cost.

i.e. P*MP_L=W

(MP_L=W/P), where wages and price are exogenously given.

EBK MICROECONOMICS, Chapter 19, Problem aWYWL

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 19 - Prob. aWYWL Ch. 19 - Prob. bWYWL Ch. 19 - Prob. cWYWL Ch. 19 - Prob. dWYWL Ch. 19 - Prob. 1QFT Ch. 19 - Prob. 2QFT Ch. 19 - Prob. 3QFT Ch. 19 - Prob. 1P Ch. 19 - Prob. 2P Ch. 19 - Prob. 3P

Explanation of Solution

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Chapter 19 Solutions