Labour market - wage determination

Question 1

economic rent d

Answer 1

the payment received by a factor of production over and above that which is needed to keep it in its present occupation

Question 2

transfer earnings d

Answer 2

the minimum payment needed to keep a factor of production in its present use

Question 3

what’s another way of saying transfer earnings (labour market)

Answer 3

the opportunity cost of a factor performing its current role

Question 4

equation for economic rent

Answer 4

total earnings minus transfer earnings

Question 5

what does economic rent depend on

Answer 5

elasticity of supply of labour

Question 6

trade union d

Answer 6

an organisation of workers who join together to further their own interests

Question 7

trade union mark up d

Answer 7

the addition to wages secured by members of a trade union, compared to what they would earn if there were no union

Question 8

what method do trade unions use to further the interests of its members

Answer 8

‘collective bargaining’

Question 9

monopsonist d

Answer 9

a single, dominant buyer

Question 10

what can firms who employ a high percentage of workers in a labour market do

Answer 10

influence the wage rate

Question 11

example of a monopsonist

Answer 11

government, main employer of soldiers

Question 12

monopsonists are ______ ______

Answer 12

price makers, they dictate the wage rate

Question 13

why is the marginal cost of labour greater than the average cost of labour

Answer 13

because the employer not only pays the new worker a higher wage rate but has to increase the rate for all other workers

Question 14

wage differentials d

Answer 14

differences in wages arising between individuals, occupations, industries, firms and regions

Question 15

explain wage differentials between skilled and unskilled workers

Answer 15

skilled workers receive more because demand is higher and there are fewer in supply, MRP is higher because they generate higher output per worker

Question 16

explain wage differentials between male and female workers

Answer 16

men receive higher pay than women, smaller percentage of women are members of trade unions, miss promotion to have children, some employers undervalue MR productivity of female workers

Question 17

explain wage differentials between full and part-time workers

Answer 17

part-time receive lower hourly wage, supply greater than demand, receive less training so MR productivity lower, less likely to be member of trade union

Question 18

explain wage differentials between ethnic origin

Answer 18

workers from ethnic minorities receive lower wages, qualifications, low skilled jobs, discrimination

Question 19

discrimination d

Answer 19

where groups of workers are treated differently to other workers in the same job regarding pay and employment

Question 20

labour market failure d

Answer 20

where the free market fails to achieve an efficient allocation of resources in the labour market

Question 21

negative discrimination d

Answer 21

when a group of workers is treated less favourably than others

Question 22

positive discrimination d

Answer 22

when a group of workers are treated more favourably than others

Question 23

what is discrimination a cause of

Answer 23

market failure

Question 24

when does negative discrimination occur

Answer 24

when workers of similar ability are paid lower wages because of race, gender, age or disability

Question 25

what does prejudice lead employers to believe

Answer 25

the marginal revenue productivity of these groups is lower than it really is

Question 26

how can you show negative discrimination on a graph

Answer 26

MRP (D) for labour shifting to the left

Question 27

explain positive discrimination

Answer 27

firms perceive the marginal revenue productivity of a particular group of workers to be higher than it actually is