PRD-4.A—a. Define (using graphs where appropriate) key terms and concepts relating to factor markets. b. Explain (using graphs where…

a. Define (using graphs where appropriate) key terms and concepts relating to factor markets. b. Explain (using graphs where appropriate) the relationship between factors of production, firms, and factor prices. c. Calculate (using data from a graph or table where appropriate) the marginal revenue product and marginal resource cost.

• Factors of production (labor, capital, and land) respond to factor prices (wages, interest, and rent), and employers’ (firms’) decision to hire is based on the productivity of the factors, output price, and cost of the factor.
• The quantity of labor demanded is negatively related to the wage rate, while the quantity of labor supplied is positively related to the wage rate in a given labor market, other things constant.
• Enduring understanding PRD-4: Factor prices provide incentives and convey information to firms and factors of production.