Perfectly Competitive Labor Markets - AP Microeconomics

Imposing a minimum wage usually causes a price floor in the market. Thus, the labor market for coal miners will likely see a surplus, which typically occurs when there is a price floor. The price will be higher than the equilibrium, which means that the labor supply will be greater than demand.

Marginal product of labor describes how the total product of labor changes when more labor is hired. If the total product of labor is rising as labor increases, then the marginal product of labor must be increasing.

The marginal product of labor is the change in output that results from an additional unit of labor. In this case, the marginal product of the fourth unit of labor would be the difference between the total output of production with four units of labor and the total output of production with three units of labor, which is 5 units.

To maximize profits, a perfectly competitive firm will hire until its marginal revenue of labor equals its marginal cost of labor. The marginal cost of labor equals the wage rate, which is $14 per hour.

The marginal revenue of labor is the marginal product of labor multiplied by the price of the good. Since the marginal product at the profit maximizing level is 7 units per hour, the market price of the good must be $2 (7 units multiplied by $2 equals $14).

Variable costs associated with production are costs that change in proportion to the level of production. By contrast, fixed costs are costs that are not dependent on production level. Fixed costs and variable costs make up a good's total cost of production.

In this case, the total cost of producing zero units is 12. The total variable cost of producing zero units is 0, which means that 12 must be the fixed cost associated with producing this good.

The total cost of producing 5 units is 33. Since total costs subtracted by fixed costs equals its variable costs, the variable cost of producing 5 units must be 21.

Imposing a minimum wage usually causes a price floor in the market. Thus, the labor market for coal miners will likely see a surplus, which typically occurs when there is a price floor. The price will be higher than the equilibrium, which means that the labor supply will be greater than demand.

Marginal product of labor describes how the total product of labor changes when more labor is hired. If the total product of labor is rising as labor increases, then the marginal product of labor must be increasing.

The marginal product of labor is the change in output that results from an additional unit of labor. In this case, the marginal product of the fourth unit of labor would be the difference between the total output of production with four units of labor and the total output of production with three units of labor, which is 5 units.

To maximize profits, a perfectly competitive firm will hire until its marginal revenue of labor equals its marginal cost of labor. The marginal cost of labor equals the wage rate, which is $14 per hour.

The marginal revenue of labor is the marginal product of labor multiplied by the price of the good. Since the marginal product at the profit maximizing level is 7 units per hour, the market price of the good must be $2 (7 units multiplied by $2 equals $14).

Variable costs associated with production are costs that change in proportion to the level of production. By contrast, fixed costs are costs that are not dependent on production level. Fixed costs and variable costs make up a good's total cost of production.

In this case, the total cost of producing zero units is 12. The total variable cost of producing zero units is 0, which means that 12 must be the fixed cost associated with producing this good.

The total cost of producing 5 units is 33. Since total costs subtracted by fixed costs equals its variable costs, the variable cost of producing 5 units must be 21.

Imposing a minimum wage usually causes a price floor in the market. Thus, the labor market for coal miners will likely see a surplus, which typically occurs when there is a price floor. The price will be higher than the equilibrium, which means that the labor supply will be greater than demand.

Marginal product of labor describes how the total product of labor changes when more labor is hired. If the total product of labor is rising as labor increases, then the marginal product of labor must be increasing.

The marginal product of labor is the change in output that results from an additional unit of labor. In this case, the marginal product of the fourth unit of labor would be the difference between the total output of production with four units of labor and the total output of production with three units of labor, which is 5 units.

To maximize profits, a perfectly competitive firm will hire until its marginal revenue of labor equals its marginal cost of labor. The marginal cost of labor equals the wage rate, which is $14 per hour.

The marginal revenue of labor is the marginal product of labor multiplied by the price of the good. Since the marginal product at the profit maximizing level is 7 units per hour, the market price of the good must be $2 (7 units multiplied by $2 equals $14).

Variable costs associated with production are costs that change in proportion to the level of production. By contrast, fixed costs are costs that are not dependent on production level. Fixed costs and variable costs make up a good's total cost of production.

In this case, the total cost of producing zero units is 12. The total variable cost of producing zero units is 0, which means that 12 must be the fixed cost associated with producing this good.

The total cost of producing 5 units is 33. Since total costs subtracted by fixed costs equals its variable costs, the variable cost of producing 5 units must be 21.

Imposing a minimum wage usually causes a price floor in the market. Thus, the labor market for coal miners will likely see a surplus, which typically occurs when there is a price floor. The price will be higher than the equilibrium, which means that the labor supply will be greater than demand.

Marginal product of labor describes how the total product of labor changes when more labor is hired. If the total product of labor is rising as labor increases, then the marginal product of labor must be increasing.

The marginal product of labor is the change in output that results from an additional unit of labor. In this case, the marginal product of the fourth unit of labor would be the difference between the total output of production with four units of labor and the total output of production with three units of labor, which is 5 units.

To maximize profits, a perfectly competitive firm will hire until its marginal revenue of labor equals its marginal cost of labor. The marginal cost of labor equals the wage rate, which is $14 per hour.

The marginal revenue of labor is the marginal product of labor multiplied by the price of the good. Since the marginal product at the profit maximizing level is 7 units per hour, the market price of the good must be $2 (7 units multiplied by $2 equals $14).