FACTor Narkets

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AP MicroeconomicsUnit Seven Review Game
JEOPARDY
Created by Margaret Distler and Adam Dobis
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YOU are responsible for keeping track of which
questions you have already answered and your
total points.
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PROFIT MAXIMIZING RULE
LEAST COST RULE
MARKET DISTRIB. OF INCOME
LABOR MARKETS FIRMS HIRING
DERIVED DEMAND
MRP
100
100
100
100
100
100
200
200
200
200
200
200
300
300
300
300
300
300
400
400
400
400
400
400
500
500
500
500
500
500
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Q DERIVED DEMAND for 100
Define derived demand.
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A DERIVED DEMAND for 100
Derived demand is where demand for one good or
service occurs as a result of demand for
another. For example demand for coal leads to
derived demand for mining, as coal must be mined
for coal to be consumed.
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Q DERIVED DEMAND for 200
Name the 3 things that alter the demand for
resources.
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A DERIVED DEMAND for 200

• Demand for the product changes
• A change in the productivity of the resource
  occurs
• Price of related resource changes

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Q DERIVED DEMAND for 300
What two things will be affected by a change in
the price of a related resource?
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A DERIVED DEMAND for 300

• Complements can change
• Pc DL PC DL

• Substitutes can change
• PC DL PC DL

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Q DERIVED DEMAND for 400
What is the formula for MRP?
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A DERIVED DEMAND for 400
MRP Marginal Revenue x Marginal Product
MR x MP
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Q DERIVED DEMAND for 500
Give the formula that proves that a change in
the demand of a product will alter the demand for
a resource.
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A DERIVED DEMAND for 500
DP DR because DP P MR since MRP
equals MR x MP then MRP and MRPDR D DR
because DP P MR since MRP MR x MP then
MRP and MRPDR
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Q MRP for 100
What does MRP stand for?
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A MRP for 100
Marginal Revenue Product
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Q MRP for 200
Marginal Revenue Product is impacted by MR and
_____?
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A MRP for 200
MP or Marginal Product
The change in total product
The change in the quantity of labor
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Q MRP for 300
What law explains the shape of the marginal
revenue product curve?
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A MRP for 300
The law of diminishing marginal returns.
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Q MRP for 400
If a fourth bagel baker in a price-taking bagel
shop would increase bagel production by 10 bagels
per hour and bagels sell for 0.50 each, the most
the bagel shop would pay for another baker is 10
x 0.50 5 per hour. What is the MRP of labor?
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A MRP for 400
The MRP of labor is 5.00.
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Q MRP for 500
For the marginal revenue product curve, what
happens to the curve with each added worker?
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A MRP for 500
The curve has a negative slope because they are
contributing less to the total revenue.
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Q PROFIT MAXIMIZING RULE for 100
What does MRP stand for?
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A PROFIT MAXIMIZING RULE for 100
Marginal Revenue Product
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Q PROFIT MAXIMIZING RULE for 200
What do the MRC and MRP curves represent?
MRC
MRP
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A PROFIT MAXIMIZING RULE for 200
MRCSupply for Labor MRPDemand for Labor
MRC
MRP
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Q PROFIT MAXIMIZING RULE for 300
What law explains the shape of the marginal
revenue product curve?
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A PROFIT MAXIMIZING RULE for 300
The law of diminishing marginal returns.
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Q PROFIT MAXIMIZING RULE for 400
If a fourth bagel baker in a price-taking bagel
shop would increase bagel production by 10 bagels
per hour and bagels sell for 0.50 each, the most
the bagel shop would pay for another baker is 10
x 0.50 5 per hour. What is the MRP of labor?
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A PROFIT MAXIMIZING RULE for 400
The MRP of labor is 5.00.
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Q PROFIT MAXIMIZING RULE for 500
For the marginal revenue product curve, what
happens to the curve as with each added worker?
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A PROFIT MAXIMIZING RULE for 500
The curve has a negative slope because they are
contributing less to the total revenue.
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Q MARKET DISTRIBUTION OF INCOME for 100
Where does household income come from?
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A MARKET DISTRIBUTION OF INCOME for 100
WRIP
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Q MARKET DISTRIBUTION OF INCOME for 200
What does WRIP stand for?
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A MARKET DISTRIBUTION OF INCOME for 200
WRIP Wages Rent Interest Entrepreneurial Profit
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Q MARKET DISTRIBUTION OF INCOME for 300
What two things does WRIP determine?
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A MARKET DISTRIBUTION OF INCOME for 300
It determines who gets the resources AND it
determines the costs for a firm.
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Q MARKET DISTRIBUTION OF INCOME for 400
Define Marginal Revenue Product
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A MARKET DISTRIBUTION OF INCOME for 400
Marginal Revenue Product The amount that each
worker earns for the company
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Q MARKET DISTRIBUTION OF INCOME for 500
What two things impact the MRP?
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A MARKET DISTRIBUTION OF INCOME for 500
The value of the good impacts the MRP AND the
productivity of the worker also impacts MRP.
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Q LEAST COST RULE for 100
What equation is used to determine the least cost?
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A LEAST COST RULE for 100
MPL MPC PL PC
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Q LEAST COST RULE for 200
To produce a given level of output at least cost,
a firm should buy inputs until it has __________
the marginal product per dollar spent on each
input.
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A LEAST COST RULE for 200
To produce a given level of output at least cost,
a firm should buy inputs until it has EQUALIZED
the marginal product per dollar spent on each
input.
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Q LEAST COST RULE for 300
How does consumer equilibrium relate to the least
cost rule?
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A LEAST COST RULE for 300
They have the same concept. For Consumer
Equilibrium, by maximizing what good comes from
adding additional inputs producers can minimize
costs just like consumers can maximize utility.
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Q LEAST COST RULE for 400
A purely competitive firm is paying twice as much
for labor per unit as for capital. Although the
average productivity of labor is twice that of
capital, their marginal products are the same. In
order to minimize cost, what should this firm do?
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A LEAST COST RULE for 400
The firm should use relatively more capital.
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Q LEAST COST RULE for 500
Explain why a least-cost combination of resources
is not necessarily a profit-maximizing
combination.
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A LEAST COST RULE for 500
A least-cost combination of resources is not
necessarily profit-maximizing since the
least-cost rule requires that the marginal 
physical product per dollar expenditure on each
resource be proportionate at any number greater
than zero the profit-maximizing rule requires
that the marginal revenue product of each
resource employed by equal to its marginal
resource cost and, therefore, their rations must
be equal to 1.
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Q LABOR MARKETS FIRMS HIRING for 100
On a labor market graph, what do MRC and MRP
represent?
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A LABOR MARKETS FIRMS HIRING for 100
MRC is the supply of labor and MRP is the demand
for labor.
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Q LABOR MARKETS FIRMS HIRING for 200
Draw a labor market graph.
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A LABOR MARKETS FIRMS HIRING for 200
Wages
MRC
MRP
Q1
Q2
Q3
Quantity of labor
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Q LABOR MARKETS FIRMS HIRING for 300
Why is the MRP curve not perfectly elastic?
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A LABOR MARKETS FIRMS HIRING for 300
The product made will sell for one price but each
additional worker after a point is less
productive.
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Q LABOR MARKETS FIRMS HIRING for 400
What are the profit maximizing output and input
formulas?
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A LABOR MARKETS FIRMS HIRING for 400
MRMC Profit Maximizing Output
MRPMRC Profit Maximizing Input
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Q LABOR MARKETS FIRMS HIRING for 500
What are the formulas for finding MR and MP?
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A LABOR MARKETS FIRMS HIRING for 500
MR Change in Total Revenue Change in Quantity
of labor
MP Change in Total Product Change in Quantity
of labor
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Congrats! You have just completed the Unit Seven
Jeopardy review game. Good luck on the test!