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Unformatted text preview: In the market for F of P: Supply = households Demand = Firms Demand for a F of P is a derived demand- it is derived from a firms decision to supply a good to the market. Assumptions: 1. all markets are competitive a. Market for goods and services b. Market for factors of production 2. Firms care only about maximum profit. a. Supply of their output and demand for inputs are derived from this goal. If the marginal benefit of an additional worker is greater than the marginal cost of that worker, then the worker will be hired. MB>MC-Cost of an additional worker = wage. -Benefit of an additional worker = the value of the goods the additional worker can produce....
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