Agenda • • • • • Collect HW Review/Overview Unions and Minimum Wage Stocks Research Reporting Former Students HW Factors Market Factors of Production • Factors, Resources, Inputs – Land – Labor – Capital – Entrepreneurship Cost Minimizing Combination of Resources at a Given Level of Output • MPP/$ of Labor = MPP/$ of Capital – $ = MRC = Price (in perfectly competitive market) – Example • MPP last unit of labor = 5 • MPP last unit of capital = 8 • Labor MPP/$ = .5 Wage rate (MRC)= $10 MRC = $16 Capital MPP/$ = .5 Optimal Combination (Profit Maximizing) of Resources at a Given Level of Output • MRP/$ of Labor = MRP/$ of Capital – $ = MRC = Price (in perfectly competitive market) – Example • MRP last unit of labor = $10 • MRP last unit of capital = $16 • Labor MRP/$ = Capital MRP/$ = 1 Wage rate (MRC)= $10 MRC = $16 Perfectly Competitive Labor Market Perfectly Competitive Labor Market Perfectly Competitive Labor Market • Households = Supply • Firms = Demand Perfectly Competitive Market and Firm Wage Elasticity- Labor Markets Perfectly Competitive Market and Firm • Supply = Marginal Resource Cost (MRC) • Demand = Marginal Revenue Product (MRP) • Profit-Max Q of Labor: MRP=MRC Perfectly Competitive Firm • MRP>MRC- hire more • MRC>MRP- fire some Monopolist and Perfectly Competitive Labor Market Monopolist and Perfectly Competitive Labor Market Labor Market Monopsony in Competitive Product Market *one buyer of labor (only one firm hiring) Labor Market Monopsony Product Market Monopoly *one buyer of labor (only one firm hiring) Minimum Wage in PC Labor Market? Minimum Wage with Monopsony in Labor Market? SANTA • • • • • Ded Moroz Joulupukki Weihnachtsmann Pai Natal Babbo Natale Minimum Wage Monopolist and Perfectly Competitive Labor Market Unions • Collective Bargaining • _________ of workers • Clayton Antirust Act (1914) Unions in PC Labor Market? Union and Monopolist and Perfectly Competitive Labor Market Unions and Monopsonistic Labor Market? Agenda • FRQ return • Land and Economic Rent • FRQs – dos mas – De nada Unions and Monopsonistic Labor Market • Bilateral Monopoly – One buyer, One seller – Outcome is difficult to predict Other Factors • • • • Labor = Wage Capital = Interest (that’s it until macro) Land = Rent Entrepreneurship- profit Land Economic Rent • Term originally only applied to land • Payment for land above price necessary for land to be made available • A decrease in the payment for land will not reduce the quantity of land available for rent. Economic Rent- modern • Payment for any factor above price necessary for that factor to be employed • A decrease in the payment for the factor will not reduce the available supply of the factor Economic Rent- in other words • Payment for/to any factor above the payment required by its owner Human Capital • Investment to improve skills and productivity of labor • Self or Firm • High wage jobs OFTEN include large human capital investments From the Homework • Petroleum • Nuts and bolts • Prize Horse From the Homework • Professors’ Salary and Marginal Productivity From the Homework • University Monopsony? • Student Unions?