What does it mean to say that the demand for a factor is a derived demand? A. Th

Question

What does it mean to say that the demand for a factor is a derived demand?

A. The demand for a factor is not influenced by the demand for the product that the factor is used to produce.

B. Changes in the wage rate will shift the demand curve for labor.

C. Changes in the price of capital will shift the demand curve for capital.

D. The demand for a factor is the result of some other demand, such as the demand for the product that the factor is used to produce.

Why is the MRP curve also the firm’s factor demand curve?

A. The MRP curve shows various quantities of a factor a firm is willing to buy at different prices, which is what the demand curve shows.

B. The MRP curve is the industry’s demand curve, not the firm’s factor demand curve.

C. Marginal physical product, which is diminishing, times marginal cost equals MRP; plotting these will yield the MRP curve.

Which of the following is true?

A. VMP=MRP for price takers because P=MR

B. if P > MR, then the firm faces a down-ward sloping demand curve for all firms in all markets, and VMP=MRP

C. VMP=MRP for price searchers because P=MP

D. MR x MRP=P x MPP for oligopolies, monopolictic, competitors and monopolies.

Explanation / Answer

Ans) the correct option is D. The demand for a factor is the result of some other demand, such as the demand for the product that the factor is used to produce.

Ans) the correct option is A. The MRP curve shows various quantities of a factor a firm is willing to buy at different prices, which is what the demand curve shows.

Ans) the correct option is A. VMP=MRP for price takers because P=MR. VMP = MRP in case of perfect competion Because firms are price takers

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