EXERCISE 15: Factor Markets
J.Wahl - Micro Principles
1. Why do we call the demand for factor inputs a derived demand?
2. You own a candle-making business. You know that you can charge a maximum
of 50 cents per candle. The market wage you face is currently $6/hour. Suppose
you also have ergonomic information that allows you to determine the
productivity of additional workers, as the following table outlines:
Number of workers total number of candles per hour
1 12
2 26
3 44
4 60
5 73
6 85
7 95
8 100
How many workers will you employ and why?
3. T/F and explain. Profit maximization implies cost minimization but the reverse is
not necessarily true.
4. Why are you in school?
5. Why do different jobs pay different wages in equilibrium?
