UNIT 5: Product Factor Markets // AP Micro Economics, 2023

What are the Four Factors of Production?

• Land

• Labor

• Price

• Entrepreneurship

• Capital

Answer explanation

5.1- Introduction to Factor Markets

What is Physical Capital?

• Any effort a person devotes to a task for which that person is paid

• Any human-made resource that is used to create other goods and services

• Any skills or knowledge gained by a worker through education and experience

• Any effort a person devotes to a task for which that person is paid

Answer explanation

5.1- Introduction to Factor Markets

What is Human Capital?

• Any effort a person devotes to a task for which that person is paid

• Any human-made resource that is used to create other goods and services

• Any skills or knowledge gained by a worker through education and experience

• Any effort a person devotes to a task for which that person is paid

Answer explanation

5.1- Introduction to Factor Markets

What is the Factor Price for Land?

• Rent

• Wage

• Interest

• Profit

Answer explanation

5.1- Introduction to Factor Markets

What is the Factor Price for Labor?

• Rent

• Wage

• Interest

• Profit

Answer explanation

5.1- Introduction to Factor Markets

What is the Factor Price for Capital?

• Rent

• Wage

• Interest

• Profit

Answer explanation

5.1- Introduction to Factor Markets

What is the Factor Price for Entrepreneurs?

• Rent

• Wage

• Interest

• Profit

Answer explanation

5.1- Introduction to Factor Markets

For Labor Demand, as wage falls...

• Labor Demanded stops

• Labor Demanded Decreases

• Labor Demanded stays constant

• Labor Demanded Increases

Answer explanation

5.1- Introduction to Factor Markets

For Labor Supply, as wage falls...

• Labor Demanded stops

• Labor Demanded Decreases

• Labor Demanded stays constant

• Labor Demanded Increases

Answer explanation

5.1- Introduction to Factor Markets

What is a Minimum Wage?

• A minimum amount employer are allowed to pay their workers

• Wage (the price of labor) is set by the market

• The additional cost for an additional resource (worker)

• Higher wages give workers incentives to leave other industries or give up leisure activities

Answer explanation

5.1- Introduction to Factor Markets