The marginal revenue product of labor is found by multiplying the marginal revenue from selling additional units of the good (in the case of a firm in a perfectly competitive industry the marginal revenue is equal to the price of the product) times the marginal product of the unit of labor. The marginal product of the unit of labor tells you the addition to total product the firm receives when it hires the additional unit of labor and then when the firm multiplies this by marginal revenue it is calculating the value of that additional output and hence the addition to its revenue from hiring an additional unit of labor.
Common resources are rival but not excludable. • Examples of public goods are national defence, basic research etc. • The aggregate demand curve for a public good is obtained by the vertical summation (not horizontal as is the case with private goods) of the individual demand curves. At each quantity level, we see the willingness to pay of each individual and then estimate society’s total willingness to pay by adding the willingness to pay of the various individuals. Of course, the above point is the ideal situation in which we assume that we know the preference or the willingness to pay of each individual. But this is very difficult to know because people will usually tend to lie and understate their willingness to pay in the hope that somebody else will pay for the public good and they will be able to enjoy it for free (because it is non-rival and non-excludable).
In light of the limits that have been placed on this answer I will only focus my comments on the demand for labor and on the other hand the supply of labor. First the demand for labor. This is to me by far the most interesting aspect of the course. Labor demand is derived from the firms desire to maximize profits. This is a basic assumption of labor demand. Will the firms continually try to make ...
This problem is the free rider problem. • Examples of common resources are clean water and air, congested roads, wildlife etc.