Micro 6.4

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What are 6 characteristics of a perfectly competitive labour market?
Units of labour are homogenous, workers accept wage rate, price takers, profit maximisation at MRP=MC, perfect information, no barriers to entry/exit.
1 of 5
What is the wage rate determined by?
Supply and demand at the market level.
2 of 5
Why are individual firms price takers?
If they pay a wage below the equilibrium, workers will not accept this and will work for rival firms.
3 of 5
What kind of supply curve does each firm face at the market ruling wage?
Perfectly elastic, since each firm can employ all the labour it requires at this rate.
4 of 5
What do firms do when deciding how many workers to employ?
They equate marginal revenue product with the marginal cost of employing labour.
5 of 5

Other cards in this set

Card 2

Front

What is the wage rate determined by?

Back

Supply and demand at the market level.

Card 3

Front

Why are individual firms price takers?

Back

Preview of the front of card 3

Card 4

Front

What kind of supply curve does each firm face at the market ruling wage?

Back

Preview of the front of card 4

Card 5

Front

What do firms do when deciding how many workers to employ?

Back

Preview of the front of card 5

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