micro-economics assignment

Principles of Microeconomics Problem Set 8 Due 11/4/15

1. Why is the demand for a resource known as a “derived demand”? (4 points)

2. Explain why a higher elasticity of demand for the finished product leads to a higher elasticity of

demand for the resource. (4 points).

3. What, in words, is meant by MRC=MRP? Why is this the decision rule for resource demand? (6

points).

4. Why does a monopsonist face an upward sloping supply curve of labor? How does this affect

the number of workers that the monopsonist hires and how much he or she pays them? (6

points)