13. Intro to Factors of Production

Question	Answer
Define "supply price" of a factor.	Minimum payment needed to bring it into use and keep it in that employment.
Define "transfer earnings" of a factor.	Earnings it must receive to stay in that employment.
What is economic rent?	The earnings in excess of supply price (Producer surplus)
What 2 things are required to earn economic rent?	Some monopoly power or inelasticity of supply.
What is Quasi-Rent?	Temporary economic rent
What is a specific factor of production? Non-specific factor of production?	One with no alternative uses (cash register) Multiple uses (shop unit)
Can non-specific FoP make transfer earnings?	Yes
What type of demand is the demand for FoP?	Derived Demand
Explain Marginal Physical Product (MPP) of a FoP	The extra output produced because of one unit of that factor
Explain Marginal Revenue Product (MRP) of a FoP	The extra revenue a firm gains because of one unit of that factor
What law does MPP depend on?	Law of Diminishing Marginal Returns.
The demand curve of a factor is also...	The MRP curve.
In order to supply any good or service, a firm needs...	Land, labour, capital and enterprise.

Resource summary

	Created by samstevenson2014 almost 10 years ago