【正文】 tells us what an additional worker costs a firm. –VMP and the wage rate together determine the quantity of labor demanded by a firm. The Demand for a Factor of Production 169。 2020 Pearson AddisonWesley –Table shows the calculation of VMP. –From the firm’s total product schedule, calculate the marginal product of labor. The Demand for a Factor of Production 169。 2020 Pearson AddisonWesley –Entrepreneurship –Entrepreneurship services are not traded in markets. –Entrepreneurs receive the profit or bear the loss that results from their business decisions. The Anatomy of Factor Markets 169。 2020 Pearson AddisonWesley –Market for Capital Services –Capital consists of the tools, instruments, machines, buildings, and other constructions that have been produced in the past and that businesses now use to produce goods and services. –These physical objects are capital goods and capital goods are traded in goods markets. This market is not a market for capital services. –A market for capital services is a rental market—a market in which the services of capital are hired. The Anatomy of Factor Markets 169。 2020 Pearson AddisonWesley The Anatomy of Factor Markets –Four factors of production are ? Labor ? Capital ? Land (natural resources) ? Entrepreneurship ? Let’s take a look at the markets in which these factors of production are traded. 169。 2020 Pearson AddisonWesley 169。 2020 Pearson AddisonWesley 169。 2020 Pearson AddisonWesley The Tragedy of the Commons Individual Transferable Quotas An individual transferable quota (ITQ) is a production limit that is assigned to an individual who is free to transfer (sell) the quota to someone else. A market in ITQs emerges. If the efficient quantity of ITQs is assigned, the market price of an ITQ confronts resource users with a marginal cost equal to MC + price of ITQ. With MC + price of ITQ equal to MSB, the quantity produced is efficient. 169。 2020 Pearson AddisonWesley The Tragedy of the Commons Property Rights By converting the mon resource to private property, fishers face the full social cost of their actions. The marginal social cost curve bees the supply curve and the resource is used efficiently. 169。 2020 Pearson AddisonWesley The Tragedy of the Commons The marginal social cost curve is MSC. The efficient quantity is 300,000 tons per year. At the market equilibrium, there is overfishing and a deadweight loss arises. 169。 2020 Pearson AddisonWesley The Tragedy of the Commons Figure illustrates the sustainable catch. As the stock of fish increases, the sustainable catch increases. Beyond that number, more fish pete for food and the sustainable catch falls. If the catch exceeds the sustainable catch, the fish stock diminishes. 169。 2020 Pearson AddisonWesley The Tragedy of the Commons The tragedy of the mons is the overuse of a mon resource that arises when its users have no incentive to conserve it and use it sustainably. Examples include the overfishing of Atlantic Ocean cod and South Pacific whales. The traditional example from which the term derives is the mon grazing land surrounding middleage British villages. 169。 2020 Pearson AddisonWesley Negative Externality: Pollution Emissions Charges The government sets a price per unit of pollution, so that the more a firm pollutes, the higher are its emissions charges. For the emissions charge to induce the firm to generate the efficient level of pollution, the government would need a lot of information that is usually unavailable. 169。 2020 Pearson AddisonWesley Negative Externalities: Pollution Taxes The government can set a tax equal marginal external cost. The effect of such a tax is to make marginal private cost plus the tax equal to marginal social cost, MC + tax = MSC. This tax is called Pigovian tax, in honor of the British economist Arthur Cecil Pigou, who first proposed dealing with externalities in this fashion. 169。 2020 Pearson AddisonWesley Negative Externality: Pollution The Coase solution works only if transactions costs are low. Transactions costs are the cost of conducting a transaction. An example is the transactions costs of buying a home include fees for a realtor, a mortgage loan advisor, and legal assistance. When a large number of people are involved in an externality and transactions costs are high, the Coase solution of establishing property rights doesn’t work and governments try to deal with the externality. 169。 2020 Pearson AddisonWesley Figure illustrates how the establishment of property rights achieves an efficient oute. The producer of the good bears all the costs. The market oute is efficient because at the quantity of the good produced MSC equals MSB. Negative Externality: Pollution 169。 2020 Pearson AddisonWesley At the market equilibrium, MSB