平狄克微观经济学Markets for Factor Inputs.ppt

Chapter 14 Chapter 14 Markets for Factor Inputs Topics to be Discussed Competitive Factor Markets Equilibrium in a Competitive Factor Market Factor Markets with Monopsony Power Factor Markets with Monopoly Power Competitive Factor Markets Characteristics Large number of sellers of the factor of production Large number of buyers of the factor of production The buyers and sellers of the factor of production are price takers Competitive Factor Markets Demand for a factor input when only one input is variable: Factor demands are derived demand Demand for an input that depends on, and is derived from, both the firm’s level of output and the cost of inputs Demand for computer programmers is derived from how much software Microsoft expects to sell Factor Input Demand – One Variable Input Assume firm produces output using two inputs: Capital (K) and Labor (L) Hired at prices r (rental cost of capital) and w (wage rate) K is fixed (short run analysis) and L is variable Firm must decide how much labor to hire Factor Input Demand – One Variable Input How does a firm decide if it is profitable to hire another worker? If the additional revenue from the output of hiring another worker is greater than its cost Marginal Revenue Product of Labor (MPRL) Additional revenue resulting from the sale of output created by the use of one additional unit of an input Factor Input Demand – One Variable Input The incremental cost of a unit of labor is the wage rate, w Profitable to hire more labor if the MRPL is at least as large as the wage rate, w Must measure the MRPL Factor Input Demand – One Variable Input MRPL is the additional output obtained from an additional unit of labor, multiplied by the additional revenue from an extra unit of output Additional output is given by MPL and additional revenue is MR Factor Input Demand – One Variable Input Factor Input Demand – One Variable Input In a competitive market, MR = P This means, for a competitive market Marginal Revenue Product Factor I