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ECON 2005 > FINAL EXAM REVIEW > Flashcards

FINAL EXAM REVIEW Flashcards

(83 cards)

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1
Q

Marginal Product (MPL)

A

Extra production from hiring extra worker

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2
Q

Marginal Revenue Product (MRPL)

A

marginal revenue from hiring extra worker

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3
Q

MRPL =

A

MPL * Price of product

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4
Q

Rational rule for employers

A

hire more people as long as MRPL >= wage

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5
Q

Substitution effect

A

higher wage increases returns to work relative to leisure, leading people to work more

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6
Q

income effect

A

higher wage increases income & you choose leisure over work

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7
Q

Labor demand curve =

A

Marginal revenue product curve

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8
Q

Labor demand reflects whose interests?

A

employers

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9
Q

Labor demand curve is downward sloping because

A

diminishing marginal product

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10
Q

Derived demand

A

demand for input derives from demand for output > if more people are purchasing the product, you need more inputs (people) to create the output

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11
Q

Scale effect

A

when price of capital goods/inputs decreases, labor demand increases
- businesses can produce outputs more cheaply & sell a larger quantity, requiring more workers

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12
Q

Substitution effect of labor

A

when price of capital goods/inputs decreases, labor demand decreases
- demand for people gets subbed for machines, as businesses can spend less on labor in tasks are automated

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13
Q

if scale effect dominates, labor & capital are

A

complements

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14
Q

if substitution effect dominates, labor & capital are

A

substitutes

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15
Q

opportunity cost of working =

A

leisure

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16
Q

labor supply

A

marginal benefit of leisure

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17
Q

leisure is a _______ good. rise in income = increase in marginal benefit of leisure

A

normal

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18
Q

Income effect leads to a ________ sloping labor supply curve

A

downward

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19
Q

Intensive margin

A

hours each worker supplies; how intensely existing workers supply their labor

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20
Q

extensive margin

A

of people in the workforce; measure of extent of work

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21
Q

Human capital

A

accumulated knowledge & skills that make a worker more productive

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22
Q

Signal

A

an action taken to credibly convey info that is hard for someone else to verify

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23
Q

Efficiency wage

A

higher wage paid to encourage greater worker productivity

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24
Q

Compensating differential

A

difference in wages required to offset the desirable/undesirable aspects of a job

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25
licensing laws
set education/training required for a job. decrease labor supply & raise wages
26
Monopsony
when a firm is one of the few key buyers of labor. has greater bargaining power and suppliers have fewer options
27
Prejudice
a preconceived bias against a group that's not based on reason or experience
28
Implicit bias
judgements shaped by unconscious attribution of particular qualities to specific groups
29
Statistical discrimination
using observations about the average characteristics of a group to make inferences about an individual
30
General skills
skills that are useful to many employers
31
Job-specific skills
skills that are only useful to current position
32
Pay for performance incentives
linking income workers earn to performance measures
33
Extrinsic motivation
desire to do something good for external rewards like pay
34
intrinsic motivation
desire to do something good for the enjoyment of the activity itself
35
Why are nannies paid more than day cares?
Parents can't monitor their every move, so they pay them an efficiency wage to ensure they are productive and working hard to keep their job
36
Market power
extent to which a seller can charge a higher price w/out losing many sales to competing businesses
37
Sellers in what type of competition have the least market power
perfect competition
38
Sellers in what type of competition have the most market power
Monopoly
39
Output effect
price of the extra item that you sell
40
Discount effect
price cut you offer * quantity that gets price cut
41
Marginal revenue w/ market power equation
MR = output effect * discount effect
42
AT&T, Verizon, Sprint, and T-Mobile are an example of what kind of market
Oligopoly
43
If AT&T raises prices, what will happen?
Lose customers initially, but not many. Rivals will respond by also raising prices
44
Product differentiation
sellers make products slightly different, hoping that each variety is attractive to a particular group of customer
45
The jeans market is an example of ________
monopolistic competition
46
Firm demand curve
quantity buyers demand from your specific firm as your price changes
47
marginal revenue curve lies _____ demand curve and declines ______
below; faster
48
marginal revenue lies below the demand curve by an amount equal to the ___________
discount effect
49
tradeoff for people with market power is _____ vs. ______.
larger profit margin, larger quantity sold
50
market power leads to what kind of production problem?
underproduction
51
More competition leads to _____ prices and _____ quantity
lower, higher
52
Competition policy
set of laws that ensure markets remain competitive
53
anti-collusion
laws that prevent companies from agreeing to not compete
54
collusion
agreement to limit competition between rivals so they can all charge higher prices
55
merger laws
prevent competing businesses from combining to consolidate market power
56
Accounting profits
total revenue minus explicit financial costs
57
Economic profit
total revenue - explicit fin. costs - implicit opp. costs
58
average cost =
total costs/quantity produced
59
average revenue per unit =
price
60
proft margin per unit =
average revenue - average cost
61
rational rule for entry
enter new market if you expect to earn a positive economic profit (price > average costs)
62
in the long run, profitability becomes zero, meaning _____ = ______
price = average costs
63
rational rule for exit
exit market if you expect to earn a negative economic profit (price < average cost)
64
economists think of "profitable" as "earns _____ profit"
economic
65
eventually, _______ costs become the most important component of average costs
variable
66
early in business, with a small quantity produced, fixed costs constitute a ______ larger cost per unit sold
larger
67
later in business, fixed costs are ________, causing average costs to ______ fall
spread out, fall
68
variable costs ______ over time
rise
69
new competition makes your market ______ profitable
less
70
your firms demand curve is ______ elastic with new rivals entering your market
more
71
free entry
there are no factors making it particularly difficult/costly for new businesses to enter/exit
72
Price discrimination
selling same goods @ different prices
73
perfect price discrimination
charging each customer their reservation price
74
reservation price
maximum price a customer will pay for a product
75
reservation price = ______ _______
marginal benefit
76
selective discounts help solve which production problem?
underproduction
77
3 conditions necessary for price discrimination to work
1) bus must have market power 2) can prevent resale 3) can target right price to right consumer
78
target group discounts based on _______ & ________ characteristics
verifiable & difficult to change
79
hurdle method
offer lower prices only to those buyers willing to overcome some hurdle to get them
80
alternative versions & timing, fluctuating prices, haggling, extra hassle, bad service, imperfect goods, quantity discounts, bundling
examples of hurdles
81
price discrimination helps solve which production problem?
underproduction
82
price takers _____ price discriminate
don't
83
group pricing
charging diff prices to diff groups of people (ex: student discount, senior discount)

ECON 2005 (1 decks)

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