AGRICULTURAL TECHNICAL INSTITUTE AED 200: PRIN OF FOOD

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AGRICULTURAL TECHNICAL INSTITUTEAED 200 PRIN OF
FOOD RESOURCE ECONOMICS
DAY B4 PRESENTATION All material to be turned
in DAY OF PRESENTATION BE TO ROOM 100 AT 1150
TO SET UP EVERY DAY gtAUDIENCE MEMBERS TURN
IN FINAL QUESTIONS FROM EACH GROUP THE DAY
BEFORE 1 TRUE/FALSE 1 FILL IN THE
BLANK 1. MULTIPLE CHOICE gt SPREAD OUT THE
QUESTIONS AMONG THE SPEAKERS gtTHESE QUESTIONS
WILL BE USED TO MAKE UP HALF OF THE FINAL.
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PART 5 MARKET DECISIONS

• WK 7-5 PRICE DETERMINATION
• WK 8-1 MARKET DISEQUILBRIUM
• WK 8-2 FORMS OF COMPETITION
• WK 8-3 PURE COMPETITION
• WK 8-4 MONOPOLISTIC COMPETITION
• WK 8-5 MONOPOLY
• WK 9-2 ANTI-COMPETITIVE LEGISLATION
• WK 9-3 PURE INPUT COMPETITON
• WK 9-4 MONOPSONY INPUT COMPETITION
• WK 9-5 OLIGOPSONY
• WK10 STUDENT PRESENTATIONS

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DISCUSSION POINTS

• I. DEMAND FOR LABOR IN A MONOPOLY PRODUCT MARKET
  AND COMPETITIVE LABOR MARKET
• II. DEMAND FOR LABOR IN MONOSONY

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I. DEMAND FOR LABOR IN MONOPOLY PRODUCT MARKET
AND A COMPETITIVE LABOR MARKET
BUYING INPUTS

• SELLING PRODUCT

PURE
PURE
MONOPOLISTIC
MONOPSONISTIC
OLIGOPOLY
OLIGOPSONY
MONOPOLY
MONOPSONY
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A. COMMENTARY
1. PERFECTLY COMPETITIVE INPUT MARKET
a. INPUT SUPPLY CURVE IS
HORIZONTAL
ELASTIC,
b. SUPPLY CURVE PERFECTLY
SAME
ALL
c. BUY _____HE WANTS AT THE ______PRICE
2. MONOPOLY PRODUCT MARKET
a. PRODUCT DEMAND CURVE
DOWN
1. SLOPES
INVERSE
2. ___________RELATIONSHIP
b. MARG REV PRODUCT (_______DEMAND)
LABOR
DOWN
1. SLOPES
BELOW
2. __________DEMAND CURVE 1/2
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B. COMPARSION OF PURE COMPETITOR MONOPOLY
DEMAND FOR LABOR MARKET
COMPETITIVE
MONOPOLY
P
P
DL
1. MARG VAL PROD
1. MARG VAL PROD
2. MARG REV PROD
2. MARG REV PROD
3. DEMAND FOR LABOR
3. DEMAND FOR LABOR
QL
QL
DL
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C. CALCULATION OF DEMAND FOR LABOR IN A MONOPOLY
PRODUCT MARKET
WAGE
4.00
UNITS OF LABOR 0 1 2 3 4 5
MARG VALUE PROD 0 100 72 48 28 12
MARG REV PROD XXX 100 62 30 4 -16
TOT PROD 0 10 18 24 28 30
TOT REV 0 100 162 192 196 180
MARG PROD XXX 10 8 6 4 2
PRICE 0 10 9 8 7 6
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D. CHART DEMAND FOR LABOR IN A MONOPOLY PRODUCT
MARKET COMPETITIVE LABOR MARKET
MONOPOLY FIRM
LABOR MARKET
VAL OF MAR PROD

SL

DL
MARG REV PROD DEMD FOR LABOR
SL MRCL
W
DL
Q
Q
QP
DL
QM
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D. CONCLUSION OPTIMUM LABOR USE IN A MONOPOLY
PRODUCT COMPETITIVE LABOR MKT

• GEN RULE FOR OPT USE OF INPUTS
• KEEP ADDING INPUTS UNTIL VALUE OF ADDED
  PRODUCT IS EQUAL TO COST OF PRODUCING IT.

2. RULE FOR OPT USE OF LABOR KEEP ADDING LABOR
UNTIL VALUE OF ADDED PRODUCT IS EQUAL TO THE
COST OF PRODUCING IT, I.E., WAGE RATE
3. FOR A MONOPOLY FIRM. THIS IS WHERE
THE _________ COST OF LABOR (THE ________ RATE IS
EQUAL TO THE ___________ OF THE PRODUCT PRODUCED
BY THE ______________
WAGE
ADDED
VALUE
LABOR
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II. DEMAND FOR LABOR IN COMPETITIVE PRODUCT
MONOPSONY LABOR MKT

• SELLING PRODUCT

BUYING INPUTS
PURE
PURE
MONOPOLISTIC
MONOPSONISTIC
OLIGOPOLY
OLIGOPSONY
MONOPOLY
MONOPSONY
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IV. MONOPSONY INPUT MARKET
A. COMMENTARY
1. THE MONOPSONY IS THE ONLY BUYER IN AN INPUT
MARKET.
2. ECONOMIC THEORY SAYS THAT AS HE DEMANDS MORE,
GIVEN A FIXED SUPPLY OF THOSE INPUTS, THE PRICE
FOR THE INPUTS WILL INCREASE.
3. THUS THE INPUT SUPPLY CURVE HAS A POSITIVE
SLOPE, AND A DIRECT RELATIONSHIP.
4. THE MARGINAL INPUT COST LINE LIES ABOVE THE
INPUT SUPPLY CURVE.
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5. THE REAL WORLD

• a. ARE THERE TRUE MONOPSONIES? _______    CLOSE?
  ____

NO
YES
b. "OWE MY SOUL TO COMPANY STORE" 
________________________ TOWNS
MINING
WAGES
c. _______________ ARE LOWER IN ______________
TOWNS IN REMOTE AREAS
COLLEGE
d. PROFESSIONAL _____________________
SPORTS
MEAT PACKER
e. AG ONLY ___________________ FOR MILES
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IV. DEMAND FOR LABOR IN A MONOPSONY
MARG LABOR COST XXX5 7 11 1315171921
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LABOR UNITS 0 1 2 3 4 5 6 7 8 9 10
WAGE RATE XX 5 6 7 8 9 10 11 12 13 14
LABOR COST 0 5 12213245 60 77 96117
140
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MONSONY LABOR PURCHASER

DL MRPL
MONSONY MARG LABOR COST L
SLAB
WC
WM
DL MRPL
Q
QM
QC
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II CALCULATION PURE COMPETITIONCOMPETITIVE
INPUT PRICE 4.00 SELL PRICE 2.00
MARG INPUT COST
MARG PHY PROD
MARG VAL PROD
A. PERFECT
TOTINPUT COST
IN- PUT
OUT- PUT
X 4 4 4 4 4 4 4 4 4
1 2 3 4 5 6 7 8 9 10
1 3 6 10 15 19 22 24 25 24
4
X 2 3 4 5 4 3 2 1 -1
X 4 6 8 10 8 6 4 2 2
8
12
16
20
24
28
32
36
40
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II CALCULATION MONOPSONY MONOPSONY INPUT PRICE
VAR SELL PRICE 2.00
TOTAL INPUT COST
MARG PHY PROD
MARG VAL PROD
MARG INPUT COST
A. IMPERFECT
IN- PUT
OUT- PUT
INPUT PRICE
1 2 3 4 5 6 7 8 9 10
1 3 6 10 15 19 22 24 25 24
3.00 3.50 4.00 4.50 5.00 5.50 6.00 6.50 7.00 7.50
3 7 12 18 25 33 42 52 63 75
X 2 3 4 5 4 3 2 1 -1
X 4 6 8 10 8 6 4 2 2
X 4 5 6 7 8 9 10 11 12
MONOPONSY
PURE
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III. GRAPH
A. PURE INPUT COMPETITION
PRICE OF LABOR
MARG VALPROD
MARG INPUT COST
4
Q OF LABOR
8
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III. GRAPH
A. IMPURE (MONOPONSY) INPUT COMPETITION
PRICE OF LABOR
MARG VAL PROD
MARG INPUT COST
8
MARG INPUT COST
4
8
6
QNT OF LABOR
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A. OPTIMUM  PRODUCTION 1. WITH  PERFECT  INPUT
COMPETITION 

• RULE ADD INPUTS UNTIL THE VALUE OF THE ADDED
  PRODUCT (MVP) IS EQUAL TO THE MARGINAL INPUT 
  COST ( WHICH EQUALS THE INPUT PRICE  IN PURE
  COMPETITION ).

SINCE THE INPUT PRICE REMAINS CONSTANT WE KNOW
THAT THE LINE REPRESENTING PRICE WILL BE
____________. THEREFORE THE OPTIMUM USE OF THE
INPUT IS _____UNITS.
HORIZONTAL
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HOWEVER, IN IMPERFECT INPUT COMPETITION THE
MARGINAL INPUT COST LINE SLOPES UP . SINCE
MARGINAL INPUT COST LINE SLOPES UP IT WILL
INTERSECT THE MARGINAL VALUE PRODUCT AT A LOWER
LEVEL OF  INPUT USE.
  B.  OPTIMUM  PRODUCTION WITH  IMPERFECT
INPUT COMPETITION   
RULE ADD INPUTS UNTIL THE VALUE OF THE ADDED
PRODUCT (MVP) IS EQUAL TO THE MARGINAL INPUT
COST (MIC).
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LESS INPUTS MEANS LESS
OUTPUT

• LESS OUTPUT MEANS THAT THE SUPPLY CURVE WILL
  SHIFT TO THE LEFT.
• IF THE SUPPLY CURVE SHIFTS TO THE LEFT , THE
  EQUILIBRIUM PRICE WILL BE HIGHER .
• THUS BECAUSE OF REDUCED INPUT COMPETITION THE
  CONSUMER WILL PAY MORE.

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NEXT TOPIC

• OLIGOPOSONY