MARKETS FOR FACTOR INPUTS1. Perfectly competitive factor markets;2. Input markets in which buyers of factors have monopsony power;3.Input markets in which sellers of factors have monopoly power.Econ 100A Mortimerupstreamdownstream
COMPETITIVE FACTOR MARKETSIn a competitive factor market, a firm can buy any amount of labor it wants without affecting the price of labor (wage). Therefore, the firm faces a perfectly elastic supply curve. Econ 100A MortimerLabor MarketAE, ME, Sw*w*wLHiring by a FirmMV, DwLAdditional benefit from hiring one more unit of labor = additional cost of the laborl*L*Market supply of laborMarket demand for labor
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