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ECON 2005 > FINAL EXAM REVIEW > Flashcards

FINAL EXAM REVIEW Flashcards

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
Q

licensing laws

A

set education/training required for a job. decrease labor supply & raise wages

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26
Q

Monopsony

A

when a firm is one of the few key buyers of labor. has greater bargaining power and suppliers have fewer options

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27
Q

Prejudice

A

a preconceived bias against a group that’s not based on reason or experience

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28
Q

Implicit bias

A

judgements shaped by unconscious attribution of particular qualities to specific groups

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29
Q

Statistical discrimination

A

using observations about the average characteristics of a group to make inferences about an individual

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30
Q

General skills

A

skills that are useful to many employers

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31
Q

Job-specific skills

A

skills that are only useful to current position

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32
Q

Pay for performance incentives

A

linking income workers earn to performance measures

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33
Q

Extrinsic motivation

A

desire to do something good for external rewards like pay

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34
Q

intrinsic motivation

A

desire to do something good for the enjoyment of the activity itself

35
Q

Why are nannies paid more than day cares?

A

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
Q

Market power

A

extent to which a seller can charge a higher price w/out losing many sales to competing businesses

37
Q

Sellers in what type of competition have the least market power

A

perfect competition

38
Q

Sellers in what type of competition have the most market power

A

Monopoly

39
Q

Output effect

A

price of the extra item that you sell

40
Q

Discount effect

A

price cut you offer * quantity that gets price cut

41
Q

Marginal revenue w/ market power equation

A

MR = output effect * discount effect

42
Q

AT&T, Verizon, Sprint, and T-Mobile are an example of what kind of market

A

Oligopoly

43
Q

If AT&T raises prices, what will happen?

A

Lose customers initially, but not many. Rivals will respond by also raising prices

44
Q

Product differentiation

A

sellers make products slightly different, hoping that each variety is attractive to a particular group of customer

45
Q

The jeans market is an example of ________

A

monopolistic competition

46
Q

Firm demand curve

A

quantity buyers demand from your specific firm as your price changes

47
Q

marginal revenue curve lies _____ demand curve and declines ______

A

below; faster

48
Q

marginal revenue lies below the demand curve by an amount equal to the ___________

A

discount effect

49
Q

tradeoff for people with market power is _____ vs. ______.

A

larger profit margin, larger quantity sold

50
Q

market power leads to what kind of production problem?

A

underproduction

51
Q

More competition leads to _____ prices and _____ quantity

A

lower, higher

52
Q

Competition policy

A

set of laws that ensure markets remain competitive

53
Q

anti-collusion

A

laws that prevent companies from agreeing to not compete

54
Q

collusion

A

agreement to limit competition between rivals so they can all charge higher prices

55
Q

merger laws

A

prevent competing businesses from combining to consolidate market power

56
Q

Accounting profits

A

total revenue minus explicit financial costs

57
Q

Economic profit

A

total revenue - explicit fin. costs - implicit opp. costs

58
Q

average cost =

A

total costs/quantity produced

59
Q

average revenue per unit =

A

price

60
Q

proft margin per unit =

A

average revenue - average cost

61
Q

rational rule for entry

A

enter new market if you expect to earn a positive economic profit (price > average costs)

62
Q

in the long run, profitability becomes zero, meaning _____ = ______

A

price = average costs

63
Q

rational rule for exit

A

exit market if you expect to earn a negative economic profit (price < average cost)

64
Q

economists think of “profitable” as “earns _____ profit”

A

economic

65
Q

eventually, _______ costs become the most important component of average costs

A

variable

66
Q

early in business, with a small quantity produced, fixed costs constitute a ______ larger cost per unit sold

A

larger

67
Q

later in business, fixed costs are ________, causing average costs to ______ fall

A

spread out, fall

68
Q

variable costs ______ over time

A

rise

69
Q

new competition makes your market ______ profitable

A

less

70
Q

your firms demand curve is ______ elastic with new rivals entering your market

A

more

71
Q

free entry

A

there are no factors making it particularly difficult/costly for new businesses to enter/exit

72
Q

Price discrimination

A

selling same goods @ different prices

73
Q

perfect price discrimination

A

charging each customer their reservation price

74
Q

reservation price

A

maximum price a customer will pay for a product

75
Q

reservation price = ______ _______

A

marginal benefit

76
Q

selective discounts help solve which production problem?

A

underproduction

77
Q

3 conditions necessary for price discrimination to work

A

1) bus must have market power 2) can prevent resale 3) can target right price to right consumer

78
Q

target group discounts based on _______ & ________ characteristics

A

verifiable & difficult to change

79
Q

hurdle method

A

offer lower prices only to those buyers willing to overcome some hurdle to get them

80
Q

alternative versions & timing, fluctuating prices, haggling, extra hassle, bad service, imperfect goods, quantity discounts, bundling

A

examples of hurdles

81
Q

price discrimination helps solve which production problem?

A

underproduction

82
Q

price takers _____ price discriminate

A

don’t

83
Q

group pricing

A

charging diff prices to diff groups of people (ex: student discount, senior discount)

ECON 2005 (1 decks)

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