Problem Set 5 1.

Derived demand is a term in economics, where demand for one good or service occurs as a result of demand for another. Tickets are a derived demand for entertainment. 2. MRP is the extra product made as a result of hiring more workers; the MRC is the extra resource cost of hiring one extra worker. 3. a market form in which only one buyer faces many sellers. The NBA would be a monopsony.

2. a. the law of margina revenue product states that as more workers are hired, the return from each additional worker will be less b. The firm should hire workers up to the point where most profit will be made. In this case it is at 4 workers, because the cost of 25 dollars per worker is 100 dollars, but the revenue is 170, giving a profit of 70 dollars, maximizing profit. C. The firm would now want to hire 5 workers because that would be the profit maximization if the price would be 3 dollars. d.chart.