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AP MICRO > Labor Market Test > Flashcards

Labor Market Test Flashcards

1
Q

MP

A

Change in total product

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2
Q

TR

A

MR + next MR

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3
Q

MR

A

Change in total revenue

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4
Q

Price

A

TR/TP

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5
Q

Profit max =

A

One

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6
Q

Least costly=

A

Both ratios equal each other

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7
Q

Ratio for least costly

A

MP/price

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8
Q

Ratio for profit max

A

The Mrp/price (the one that is the same as price)

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9
Q

Substitution effect

A

Machinery price goes down so firms use more machinery than labor; production costs decrease and output decreases so demand increases

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10
Q

Output effect

A

Since the demand for the product increased the demand for labor increases

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11
Q

Net effect

A

Since output and substitution are opposites the stronger one will win out

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12
Q

Explain a monopsony graph

A

Because worker’s skills aren’t transferable the firm can hire less workers at lower wages than society would like

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13
Q

Explain the derived demand(demand enhancement) graph

A

Workers drive up demand through ads, feather bedding, etc. So they hire more workers at higher wages

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14
Q

Explain the craft/ exclusive Union

A

Workers limit the labor supply by making it harder to join the profession through required professional licensing which causes less workers and higher wages

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15
Q

Explain the industrial/inclusive Union

A

Workers refuse to work below a certain wage rate they hire fewer workers at a higher wage than the firm would like creates a surplus of workers

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16
Q

Explain a bilateral monopoly

A

A bilateral monopoly is the price difference that occurs between the industrial union and monopsony. Monopsony wants to give lower wages and union wants higher wages. The disagreement is solved through collective bargaining

17
Q

What is MRP?

A

Demand for workers

18
Q

What is MRC?

A

The wage

19
Q

What are characteristics of a PC labor market?

A

Many small firms are hiring workers that have identical skills, the wage rate is constant, workers are wage taker

20
Q

Why is a PC demand curve down sloping?

A

Diminishing productivity

21
Q

MRP=

FOR PC ONLY

A

MP times price

22
Q

What is derived demand?

A

Jobs that are only jobs because of the product that they produce

23
Q

Characteristics of an imperfect competition labor market?

A

Price isn’t constant,MRC above supply curve

24
Q

Why is an imperfect competition down sloping?

A

Diminishing marginal productivity and they have to lower the price to sell the next unit

25
Q

MRC=wage rate
MRP= MRC
FOR WHAT?

A

IMPERFECT COMPETITIN LABOR MARKETS

26
Q

Change in demand is proportional to change in demand curve

A

Increase demand= curve to the right

Decrease demand= curve to the left

27
Q

Adding machinery to labor=

A

Increased productivity

28
Q

The better the Machinery is, the more

A

Productive the firm will be

29
Q

Improvements to the quality of resource will

A

Increase marginal productivity

30
Q

A change in price will make demand change in the opposite direction so

A

Price goes up, labor goes down

Price goes down, labor goes up

31
Q

TP

A

MP + next MP

32
Q

An elasticity less than one is

A

Inelastic

33
Q

Measuring the elasticity is measuring what?

A

The sensitivity in change in demand(MRP)

34
Q

The total cost ratio

A

If labor is the only cost then a 20% raise=20% increase

If labor is half the cost than 20% raise=10% increase

35
Q

Why do we study resource pricing?

A

Money income determination, resource allocation, cost munimization, ethical questions

36
Q

Quantity demand is

A

One point on the curve

37
Q

Demand is

A

The whole demand curve

38
Q

Change in wage changes

A

Quantity

39
Q

Change in resource demand causes

A

A shift is demand curve

AP MICRO (4 decks)

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