Test 12/10 Flashcards
PC Labor Market
- many small firms
- workers have industrial skills
- wage is constant
- workers are wage takers
What is the reason that the resource demand curve is down sloping in pure competition?
Diminishing productivity
In imperfect competition, why does the resource demand curve sloping downward?
Marginal product diminishes and product price falls as output increases
MP • P = MRP will not work for
Imperfect competition
MRP =
Change in TR/ change in resource quantity
MRC =
Change in TC/ change in resource quantity
MRP- demand for resource depends on
- productivity of resource
- market value or price of good produced
Factors that determine the sensitivity of producers to changes in resource prices: elasticity of resource demand
-ease of resource substitutability
• the larger the number of good substitute resources available, the greater the elasticity of demand for a particular resource
-elasticity of product demand
• the greatest the elasticity of product demand, the greater the elasticity of resource demand; derived demand is reason
-labor cost-total ratio
•the larger the proportion of total production cost accounted for by a resource, the greater will be the elasticity of demand for that resource
Least cost rule
MPL/PL=MPC/PC
Profit maximization rule
MRPL/PL=1
MPRC/PC=1
Wage and wage rates
The price paid for labor. Wage is said to mean some wage rate per unit of time. Weekly or monthly salaries, bonuses, royalties, commissions are also forms of wages
Nominal wage
The amount of money received per hour, per day or whatever the time frame
Real wage
The quantity of goods and service a person can obtain with nominal wages; purchasing power of nominal wages
Demand for labor depends on productivity
- plentiful capital: total capital available per worker in US is about $75,000
- access to abundant natural resources: departed or imported
- advanced technology: use of technologically superior equipment and scientific study and research
- labor quality: high living standards in health and education give us an edge
- intangible factors: efficiency and flexibility of management, business, social and political environment m, vast size of market
Market demand
Sum of labor demand curves of the individual firms
Market supply
Assume no Union, slopes upward because as a group, the firms must pay higher wages rates to obtain more workers; workers have some alternative
MRC = supply
For PC only
Union goals
- increased wages
- increased benefits
- better working conditions
Factors other than wages that affect the supply of labor
- attractiveness of the job
- skill required
- required training
- mobility
Craft Union
Skilled workers in a particular trade
Industrial union
Skilled and unskilled workers in a particular industry
Sherman antitrust act
First important federal measure to limit the power of companies that controlled a high percentage of market share
Clayton antitrust act
Outlawed anything that would “lesson competition or tend to create a monopoly in any line of commerce”
Norris-LaGuardia Act
- Limited the use of injunctions (court order) by judges to stop strikes
- ended the use of yellow dog contracts (written pledge not to join Union)
National labor relations act (Wagner act)
Guaranteed workers the right to unionize and engage in collective bargaining (negotiating a labor contract)
Fair labor standards act
- provided for minimum wage
- provided time and a half for overtime beyond 40 hours per week- for hourly wage earners
Labor management relations act (Taft Hartley)
- prevented employees from engaging in “unfair labor practices”
- outlawed closed shops (had to be in Union to get job, couldn’t get job until in Union)
- permitted Union shops (forced you to join Union)
- gave the power of injunction to the US president for strikes that threaten the “national safety”
- permitted “right to work laws” and open shops (get to choose whether or not to be in Union)
Conciliation
A third party tries to bring labor and management together to end dispute
Mediation
A third party makes suggestions on how to solve labor disputes (non binding)
Arbitration
A third party hears both sides of labor dispute and makes a decision (legally binding)
Tactics of management
- Company Union: a Union organized and financed by management
- Lockout: management shuts down a company- “locks out” the employees
- Injunction: court order to keep employees from striking
- Yellow-Dog Contract: agreeing not to join the union when hired
- Blacklist: list distributed and designed to keep people from getting hired in an industry
Tactics of labor
- strike
- picketing
- slowdown (go to work but don’t actually do much)
- closed shops
- boycott
- Union shops
If nominal wage increase is less than price level, real wage?
Drops
Which graphs show tactics of industrial union?
Industrial and bilateral
Which graphs show tactics of a monopsony?
Monopsony and bilateral
