econ final elzenga

Question 1

The income effect:

Answer 1

higher incomes make people richer, and richer people can afford to choose more leisure

Question 2

Substitution Effect:

Answer 2

the decision by a worker to work more hours when his pay goes up

Question 3

What is the elasticity of the market labor supply if a large number of people are willing to enter the labor market?

Answer 3

highly elastic

Question 4

Law of Labor Demand:

Answer 4

the higher the wage, the lower the quantity of labor demanded

Question 5

Factors that influence the elasticity of demand for labor

Answer 5

o The elasticity of demand for the firm’s good
o The relative importance of labor in the production process
o The possibility, and cost, of substitution in production
o The degree to which marginal productivity falls with an increase in labor

Question 6

Entrepreneurship:

Answer 6

labor that involves high degrees of organizational skills, concern, oversight responsibility, and creativity; type of creative labor

Question 7

Shift Factors of Labor Demand:

Answer 7

o New technology
o Industry becomes more monopolistic (decrease labor since less ouptut)
o Desire for good increases

Question 8

Focal Point Phenomenon:

Answer 8

a situation where a company chooses to move, or expand, production to another country because other companies have already moved or expanded there

Question 9

Organizations that resist wage supply and demand pressures:

Answer 9

labor unions, professional associations, and agreements among employers

Question 10

Monopsony:

Answer 10

a market in which a single firm is the only buyer (company town); Takes into account that hiring an additional worker will increase the wage that must be paid to all workers; Marginal

Question 11

Factor Cost:

Answer 11

the additional cost to a firm of hiring another worker
o Reason people argue for a minimum wage
o = Demand

Question 12

Bilateral Monopoly:

Answer 12

a market with only a single seller and a single buyer

Question 13

4 ways to make money:

Answer 13

o wages
o rent
o profits
o interest

Question 14

Three types of direct demand-side discrimination

Answer 14

o Discrimination based on individual characteristics
o Discrimination based on group characteristics
o Discrimination based on irrelevant individual characteristics

Question 15

Institutional discrimination:

Answer 15

the structure of the job makes it difficult or impossible for certain groups of individuals to succeed

Question 16

Taft-Hartley Act:

Answer 16

placed limitations on union activities; allowed states to pass “right-to-work” laws forbidding union membership to be made a requirement for continued employment; made closed shops illegal