Micro 5.4 Resource Market, MRP and MRC: Econ Concepts in 60 Seconds- Factor Market

The video tutorial explains key economic concepts in a competitive market, focusing on how firms decide the number of workers to hire. It covers the calculation of marginal product and marginal revenue product, and how these metrics influence hiring decisions. The tutorial uses a pizza-making example to illustrate these concepts, showing that a firm should hire workers as long as the marginal revenue product exceeds the wage.

What is the primary characteristic of a perfectly competitive labor market?

• Firms can set their own wages.

• There are many buyers and sellers, and no single entity can influence the market wage.

• Workers are hired based on personal relationships.

• Firms have complete control over the number of workers they hire.

How is the marginal product of a worker calculated?

• By dividing the total output by the number of workers.

• By subtracting the previous total output from the current total output.

• By multiplying the number of workers by the price of the product.

• By adding the total output of all workers.

What does the marginal revenue product represent?

• The additional revenue generated by one more worker.

• The cost of hiring an additional worker.

• The additional revenue generated by one more unit of output.

• The total revenue generated by all workers.

When should a firm stop hiring additional workers?

• When the total revenue is maximized.

• When the marginal revenue product is less than the wage.

• When the marginal revenue product equals the wage.

• When the marginal revenue product is greater than the wage.

Why is the fifth worker not hired in the example?

• The fifth worker demands a higher wage.

• The fifth worker's marginal product is negative.

• The fifth worker's marginal revenue product is less than the wage.

• The fifth worker is not available for hire.