Competitive Long run equilibrium where p=AC at MR.=MAC output Factor Market (Perfectly Competitive Resource Market Structure Perfectly Competitive Labor Market – Wage takers Firm wage comes from market so changes in labor demand do not raise wages. (Imperfectly Competitive Resource Market Structure Imperfectly Competitive Labor Market – Wage makers Quantity derived from MR.=MR. (Km) Wage (Whom) comes from that point downward to Supply curve. (Market Failures – Externalities Thinking on the Margin… Allocation Efficiency: Marginal Cost (MAC) = Marginal Benefit (MS) Definition:
Allocation efficiency means that a good’s output is expanded until its marginal benefit and marginal cost are equal. No resources beyond that point should be allocated to production. Theory. Resources are efficiently allocated to any product when the MBA and MAC are equal. Essential Graph: Application: External Costs and External Benefits External Costs and Benefits occur when some of the costs or the benefits of the good or service are passed on to parties other than the immediate buyer or seller.
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Diminishing Marginal Utility Definition: As a consumer increases consumption of a good or service, the additional usefulness or satisfaction derived from each additional unit of the good or service decreases. ; Utility is want-satisfying power-?? it is the satisfaction or pleasure one gets from consuming a good or service. This is subjective notion. ; Total Utility is the total amount of satisfaction or pleasure a person derives from consuming some quantity. Marginal utility is the extra satisfaction a consumer realizes from an additional unit of that product. Theory: Law of Diminishing Marginal Utility can be stated as the more a specific product consumer obtain, the less they will want more units of the amen product. It helps to explain the downward-sloping demand curve. Teaching Suggestion: begin lesson with a quick “starter” by tempting a student with how many candy bars (or whatever) he/she can eat before negative marginal utility sets in when he/she gets sick!
Law of Diminishing Returns Definitions: Total Product: total quantity or total output of a good produced Marginal Product: extra output or added product associated with adding a unit of a variable resource [POMP = Average Product: the output per unit of input, also called labor productivity AP = [pick] Theory: Diminishing Marginal Product … S successive units of a variable resource are added to a fixed resource beyond some point the extra or the marginal product will decline; if more workers are added to a constant amount of capital equipment, output will eventually rise by smaller and smaller amount.