Chapter 12 Flashcards
What market are land, labour, capital and enterprise, bought and sold in?
The factor market
marginal revenue product
the increase in a firm’s total revenue that results from the use of one more unit of input.
Which of the following best describes a derived demand?
The price of farm land depends of the demand for crops such as wheat.
What is the key to answering the the question of whether or not to hire more labour?
The marginal productivity of labour.
The marginal revenue product (MRP) = _____ product x price.
Marginal
If the change in total revenue is $40 and the change in labour is 2, what is the marginal revenue product of labour?
$20
The _____ market is where goods and services are traded and the _____ market is where land, labour, capital and enterprise, are traded.
product; factor
An alternative formula for the marginal revenue product (MRP) = Δtotal revenue (ΔTR) ____ Δ labour.
Multiple choice question.
/
Since people want cell phones there is a demand for people to make cell phones. What kind of demand is this?
Derived demand
The _______ rate is the price paid per unit of labour services, such as for an hour of work.
Wage
_____ productivity is the key to answering the question of whether or not to hire more labour.
Marginal
A firm in a perfectly competitive labour market _____.
maximizes its profit by hiring workers to the point at which its wage rate equals MRP.
The marginal revenue product (MRP) = marginal product x ____.
Price
Any factor of production will be bought up to the point where its marginal revenue product equals its price.
True
If the marginal product is 20 and the price $2, what is the marginal revenue product?
40
The downward sloping part of the marginal revenue product curve is the firm’s ____ labour
demand curve for
The price paid per unit of labour services, such as for an hour of work, is referred to as the _____
Wage rate
The type of product market will affect the demand for labour.
True
A firm in a perfectly competitive labour market maximizes its profit by hiring workers to the point at which the ______ rate equals the marginal revenue product of labour.
Wage
Any factor of production will be purchased up until the point where its marginal revenue product equals its _____.
Price
Who makes up the labour force?
Everyone over the age of 15 who is willing and able to work.
What is the total amount of hours that people are willing to work called?
The labour force supply.
The ____ part of the marginal revenue product curve is the firm’s demand curve for labour.
downward sloping
At low levels of income, a wage increase creates the incentive for people to work ____ and at high levels of income, a wage increase will create the incentive for people to work _____.
more; less
How would the demand for labour curve change if the product was being sold in an imperfect market as compared to one that was perfectly competitive?
It would decline faster.
The labour supply curve is upward sloping and inelastic such that a 10% increase in wage would lead to a _____.
less than 10% increase in the quantity of labour supplied.
If the demand for labour increases more than the supply, then the wage rate will ____ and the equilibrium quantity of labour will ____
Increase/ increase
At very high wage rates, where the number of hours people are willing to work declines, what happens to the supply curve?
It bends backwards.
True or false: The market demand for labour is the vertical summation of each firm’s demand curve.
False
At high levels of income. people don’t have the same incentive to work more because of a wage increase since ____ become(s) more valuable.
leisure time
There are _____ elements underlying every wage rate.
both supply and demand
The supply curve for labour is _____ sloping and is relatively _____.
upward; inelastic
In a perfectly competitive labor market, the supply of labour available to an individual firm is perfectly
Elastic
What will happen to the wage rate and quantity of hours as a result of an increase in the demand for labour that is much larger than an increase in the supply of labour?
Both the wage rate and quantity will increase.
True or false: At high wage rates when the number of hours people are willing to work declines, the supply curve bends backwards.
True
If the labour market is competitive, then a firm will hire up to the point where its wage equals _____.
marginal revenue product of labour
In a perfectly competitive labour market, _____.
the supply of labour faced by an individual firm is perfectly elastic
Why is the supply of labour faced by an individual firm in a perfectly competitive labor market perfectly elastic?
Each of the many firms employs such a small fraction of the total available supply of labor that it cannot influence the wage rate.
Which of the following is the most important goal of a labour union?
To raise wage rates
True or false: The market demand for labour is the vertical summation of each firm’s demand curve.
False
Which of the following exemplify unions increasing the demand for their labour?
Unions in the aerospace industry lobbying to increase spending on military and on space exploration.
Teachers’ unions pushing for increased public spending on education.
Construction unions lobbying for new highways, mass-transit systems, and stadium projects.
If the union is successful in increasing the demand for the type of work they are representing, what will happen to the wage rate and the equilibrium quantity of hours?
Both the wage rate and the quantity will increase.
If a union is successful in restricting the supply of labour for the type of work they are representing, what will happen to the wage rate and the equilibrium quantity of hours?
The wage rate will increase but the quantity will decrease.
In a perfectly competitive labour market, each firm employs such a ______ fraction of the total available supply of a specific type of labour that no firm can influence the ______.
small; wage rate
What is the approximate hourly wage differential between union and non-union jobs in Canada?
3
Which of the following are the goals of a union?
To increase the wage rates for their members
To increase the work available to their members.
To improve the working conditions for their members.
Negotiated wage increases can lead to unemployment.
True
Unions try to increase the demand for labour.
True
Suppose a union is successful in increasing the demand for labour of their members. What will happen to demand and the wage rate?
Demand will shift right and the wage rate will increase.
Suppose a union is successful in restricting the supply of labour of those who are qualified to do the work. What will happen to supply of labour and the wage rate?
Supply will shift left and the wage rate will increase.
True or false: Canadian unions have been successful in increasing the wage rate for their members.
True
Which of the following is NOT used by a union to raise the wage rate for the members?
Negotiating a fixed wage below equilibrium.
When a union negotiates a wage rate increase, this can lead to increased _____.
Unemployment
A union can get a wage rate above the market equilibrium if it has bargaining power in ________ negotiations.
Contract
Which of the following exemplify unions increasing the demand for their labour?
Unions in the aerospace industry lobbying to increase spending on military and on space exploration.
Teachers’ unions pushing for increased public spending on education.
Construction unions lobbying for new highways, mass-transit systems, and stadium projects.
Wage ____ refers to the notion that different people are paid at different wage rates.
differentials
Which of the following is NOT used by a union to raise the wage rate for the members?
Lobbying the government to restrict the demand for labour.
How can a union obtain a wage rate above the market equilibrium?
Through contract negotiations.
Unions try to increase the demand for labour.
True
What is the economic term for the amount of training, education, and experience individuals have acquired?
Human capital
The higher the risk, the ____ the wage rate
Higher
What is the result of the fact that people are different and not all jobs are alike?
Wage differential
The more unpleasant a job is, the ____ the wage rate
Higher
Which of the following is a pecuniary benefit of working?
A pay cheque
_____ capital is the economic term for the accumulation of all skills and knowledge acquired by individuals.
Human
Which of the following is an example of wage discrimination?
People paid differently based on ethnicity.
Which of the following jobs will generally pay a high wage?
A job which has unpleasant characteristics associated with it.
A job which requires employees to have a high level of education..
Which of the following is NOT used by a union to raise the wage rate for the members?
Lobbying the government to restrict the demand for labour.
There is a difference in average wage rates for different broad categories of labour.
True
Which of the following is a non-pecuniary benefit of a job?
A flexible work schedule
An extra week of vacation
Discrimination is the practice of giving some people inferior treatment on the basis of such factors as _____.
Multiple select question.
gender
ethnicity
monopsony
a labour market structure in which there is only one buyer.
True or false: The Detroit automobile industry is an example of a monopsonist.
False
Which of the following jobs will generally NOT pay a high wage?
A job which has extensive non-pecuniary benefits.
The marginal wage cost shows how much extra it will cost to hire an extra worker.
True
The monopolist will keep hiring workers until MWC = MRP.
True
A monopsonist will pay a ____ wage and employ ____ people than would a competitive firm
lower; fewer
David Ricardo saw the price of land as being ____ driven.
Demand
What is the term for the return to any factor of production above what is required to keep the factor in its present use?
Economic rent
If MRP is greater than MWP then the monopolist should continue to hire more workers.
True
Which of the following are the effects on the quantity and wage rate of labour hired, resulting in a move from a monopsonist to a competitive labour market?
The level of employment increases.
The wage rate is higher.
David Ricardo saw economic rent as being a(n) ____ and not a(n) ____.
surplus; cost
Ricardo saw the price of land as being demand driven.
True
____ earnings is the term for a necessary payment that a factor of production must earn in order for it to remain in its present use?.
Transfer
_____ rent is the term for the return to any factor of production above what is required to keep the factor in its present use.
Economic
The wage rate, for professional athletes, that ensures that they continue to play into the future is their transfer earnings.
True
The monopolist will keep hiring workers until MWC = MRP.
True
rent is the difference between a person’s actual wage and their transfer earnings.
Economic
Ricardo believed that the ______ will increase because of an increase in the ______.
rent of land; price of wheat
To get professional athletes to commit to longer contracts a higher wage must be paid and the economic rent will be larger.
True
Transfer earnings are the same as an athlete’s opportunity cost.
True
Compared to other employees, the supply curves for professional athletes are more ____ which in turn leads to a ____ economic rent.
inelastic; larger
The recent expansion of professional sports teams and an increase in television revenue are _____ driven factors and have led to a(n) ____ in wages for professional athletes.
demand; increase
To get professional athletes to commit to longer contracts a ____ wage must be paid and in turn the economic rent will be much ____.
Higher/larger
The transfer earnings are what athletes could have earned by working at another chosen profession such as a coach or a trainer. This is also referred to as the _____.
opportunity cost
The issue of salary caps in professional sports is a dispute over who is entitled to what percentage of ____.
Economic rent
The more inelastic is the supply curve of labour, the greater is the amount of ______.
economic rent
Which of the following are non-renewable resources?
Oil
Minerals
Which of the following are demand driven factors that have led to the increase in the salaries for professional athletes?
An increase in ticket revenue.
An increase in television revenue.
An increase in the number of professional sports teams.
The present supply curve for oil is upward sloping.
True
The determinants of the optimal rate of extraction for a non-renewable resource depend on the price the resource sells for and the interest rate.
True
The issue of salary caps is a battle over economic rent.
True
Which of the following are renewable resources?
Fish
Trees
The recent expansion of professional sports teams and an increase in television revenue are _____ driven factors and have led to a(n) ____ in wages for professional athletes.
demand; increase
What is the term of the resource not owned by an individual or a firm?
Common property resources
Since all the oil that has been discovered is not for sale at the current price, the supply curve for oil is _____
upward sloping
Which two of the following determine the optimal rate of extraction?
The interest rate.
The future price of oil.
From a social point of view, at what rate should fish be harvested?
The natural rate of reproduction.
Which of the following will occur if more fish is harvested today?
The greater the need for conservation policy.
The fisher’s income will increase.
The amount of fish for future generations will decrease.
____ property resources are not owned by an individual or a firm.
Common
The over exploitation of common property resources is referred to as the _____ of the commons.
Tragedy
The over production of a common property resource leads to a deadweight ____ and graphically causes the output to occur at the _____ of optimal equilibrium level.
loss; right
Where is the demand for capital goods derived from?
The marginal revenue product of capital.
From an individual point of view, the more fish harvested means the greater _____.
Fishers income
The marginal revenue product of capital = the marginal physical product it produces x _____..
the price of the product
How are most large purchases of capital goods financed?
Borrowed money
There is a deadweight loss from the over production of a common property resource.
True
The demand for capital goods is inversely related to the interest rate.
True
What kind of demand is the demand for capital goods?
Derived demand
True or false: An improvement in technology that renders existing capital obsolete will shift the demand curve left.
False
More capital will be purchased if the marginal product of capital per dollar spent is ____ the marginal product of labour per dollar spent.
greater than
What occurs if the marginal product of capital per dollar spent is equal to the marginal product of labour per dollar spent.
Profits are maximized.
Factor substitution effect is where one final good is substituted for another.
False
The demand for capital goods is ____ related to the _____ rate.
inversely; interest
What will happen in the market place for capital goods if there is an improvement in technology that renders some existing capital goods obsolete?
Demand will shift right.
Factor output effect is where the increase in total output increases the demand for labour.
True
True or false: If capital becomes more productive relative to labour then firms will be tempted to purchase more capital.
True
Profits are maximized if the marginal product of capital per dollar spent is _____ the marginal product of labour per dollar spent.
Equal to
What did Schumpeter see as the role of entrepreneurs?
Bridging the gap between the idea and the execution.
Joseph Schumpeter saw entrepreneurship as the source of _____.
long-run economic growth
What is the name for the effect of the rise in total output which leads to an increased demand for labour (ie. technology creates jobs)?
The factor output effect.
According to Galbraith, only the creator of a business benefits in the long run from their entrepreneurial activities.
False
