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LOCAL INPUT: An input that has a relatively small geographic market area due to the high cost of transportation. The high transportation cost means it is easier (that is, less expensive) to locate the production activity near the input rather than trying to bring the input to the production activity. Like many things, local inputs are a matter of degree. At the other end of the spectrum lies transferrable inputs. Natural resources of the land, such as soil fertility, weather conditions, mineral deposits, tend to have the greatest local orientation. Labor and many urban public utilities, such as water distribution and sewage disposable, also tend to fall into the local category.
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Lesson 23: Factor Market Equilibrium | Unit 3: Perfect Competition
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Page: 13 of 24
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- This diagram sets the stage for analyzing the labor employment decision by a given firm, assuming perfect competition holds.
- The critical question facing the firm is: How many workers should it hire?
- The profit-maximizing decision by the firm is to hire 50 workers at the $10 wage.
- Should the firm hire more workers, profit declines.
- Should the firm hire fewer workers, profit declines.
- The critical conclusion from this analysis is that a firm in a perfect competition factor market employs a factor such that marginal revenue product (MRP) is equal to marginal factor cost (MFC).
- However, because this marginal factor cost (MFC) is equal to the factor price (W) for perfection competition, we have the secondary result that:
- MRP = W
- This is THE condition for efficiency in a factor market.
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PEAK The transition of a business-cycle expansion to a business-cycle contraction. The end of an expansion carries this descriptive term of peak, or the highest level of economic reached in recent times. A peak is one of two turning points. The other, the transition from contraction to expansion, is a trough. Turning points are important because they represent the transition from bad to good or good to bad.
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YELLOW CHIPPEROON
[What's This?]
Today, you are likely to spend a great deal of time strolling around a discount warehouse buying club seeking to buy either a package of blank rewritable CDs or yellow cotton balls. Be on the lookout for poorly written technical manuals.
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This isn't me! What am I?
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The New York Stock Exchange was established by a group of investors in New York City in 1817 under a buttonwood tree at the end of a little road named Wall Street.
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"We succeed in enterprises (that) demand the positive qualities we possess, but we excel in those (that) can also make use of our defects." -- Alexis de Tocqueville, Statesman
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SBA
Small Business Administration
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