The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7
-A firm will shut down permanently if total revenue is not sufficient to pay for total costs in the long run.
Definitions:
Marginal Productivity Theory
An economic theory suggesting that the payment to each factor of production equals the added productivity that one additional unit of the factor brings to the product.
Income Distribution
How the total earnings are distributed among people or families within an economic system.
MRP Curve
The Marginal Revenue Product curve, showing how the additional revenue from selling one more unit of a product changes with the quantity of the product sold.
Labor Demand Curve
A graphical representation of the quantity of labor employers are willing to hire at each possible wage rate, holding all other factors constant.
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