AP Microeconomics Unit V: The Factor $($Resource$)$ Market

Problem Set #$5$

$(/15)$ Define the term and explain a situation that demonstrates the 'real world' application of each

of the following. Make sure your example clearly demonstrates your understanding of each concept.

a$.$ Derived Demand

j$)$

b$.$ Marginal Revenue Product $($MRP$)$ and Marginal Resource Cost $($MRC$)($

c$.$ Monopsony $1$

$(\_\_/20)$ Use the chart regarding a perfectly competitive Yo$-$Yo factory to complete the following:

a$.$ Fully explain why the number of yo$-$yos produced increases at a decreasing rate as more workers are

hired. Identify and explain the three stages of returns. I

$\text{'}5)$

b$.$ Explain how a firm decides how many workers to hire. If the wage was constant at $$10$ per day,

how many workers should be hired? Explain how you got your answer. $($

j$)$

c$.$ PLOT the labor demand and labor supply for this firm. Compare it to a firm in a perfectly

competitive PRODUCT MARKET. Explain why suppy is constant and why demand is downward

sloping.

d$.$ Assume there is an increase in demand of yo$-$yos and they are now $$3$ each. Explain how the level

of employment will be affected. How many workers should be hired? Why did it change? $($

$1$

$\text{'}15)$ Worksheets and handouts

a$.$ "How Wages are Determined in Competitive Labor Markets."

b$.$ How Markets Allocate Resources"$$

$\text{'}5)$

c$.$ Push$-$up Machine Handout

$($in class $-$ ATTACH to the problem set

$($

Complete the practice FRQs$.$

a$.$ FRQ#$1$

b$.$ FRQ#$2$

c$.$ FRQ#$3$

$\text{'}6)$ d$.$ FRQ#$4$

$\text{'}6)$