Question: 1- Fully explain the difference between the factor market (resource market) and the product market. 2- Practice- Assume that you and your cousin start a
1- Fully explain the difference between the factor market (resource market) and the product market.
2- Practice- Assume that you and your cousin start a business selling belt buckles. The price of a belt buckle is $6 and the minimum wage is $10. Complete the table and answer the questions.
Copy the table below and complete in the answer box available to you.
| Units of Labor (L) | Total Product (Q) | Marginal Product (MP) | Product Price (P) | Total Revenue (TR) | Marginal Revenue Product (MRP) | Marginal Resource Cost (MRC) |
| 0 | 0 | - | $6 | $0 | - | - |
| 1 | 4 | $6 | ||||
| 2 | 6 | $6 | ||||
| 3 | 14 | $6 | ||||
| 4 | 3 | $6 | ||||
| 5 | 19 | $6 | ||||
| 6 | 1 | $6 | ||||
| 7 | 20 | $6 | ||||
3- In this scenario, do you supply or demand labor?
4- What happened to marginal revenue product of each worker as more workers are hired? What causes this to happen?
5- How many workers should you hire to maximize profit? How can you tell?
6- Assume that your fixed costs are $20. Calculate your profit or loss. Show your work.
7- If the minimum wage increased to $25, how many workers would you hire to maximize profit?
8- Assume instead that the price of belt buckles decreased. How will that affect the MRP of your workers?
9- Other than a change in the price of belt buckles, what else could cause the MRP of your workers to change. Explain your answer.
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