Unit 5

Question 1

resources, why?

Answer 1

money income determination, cost minimization, resource allocation, poliicy issue
assume:
purely competitive
wage taker

Question 2

demand (derived)

Answer 2

resource demand comes from product demand:

everything that comes from making a good

Question 3

marginal productivity theory of product demand

Answer 3

MRP=MRC=D

Question 4

least cost rule

Answer 4

max profit must

MP/P=MP/P

Question 5

max profit

Answer 5

MRP/P=MRP/P=1

Question 6

marginal productivity theory of income distribution

Answer 6

wage equals value of labor
criticisms:
1. inequality
2. market imperfections

Question 7

wage rate

Answer 7

price per unit labor
nominal ($ payed)
real (whats bought w/nom)

Question 8

productivity

Answer 8

1. plentiful capital
2. abundant natural resources
3. advanced tech
4. labor quality
5. other (size,specialization)

Question 9

purely comp. labor mrkt

Answer 9

• large # firms hiring
• wage takers
• workers have same skills
  assume: non-union, indiviually compete

Question 10

monopsony

Answer 10

non-competitive

1. single buyer
2. workers immobile
3. wage makers

Question 11

minimum wage

Answer 11

wage floor helps less skilled workers

Question 12

wage differentials

Answer 12

diff salaries among occupations
1. supply+demand
2. marginal revenue productivity
supply:
- noncompeting
-workers not homogenous

Question 13

higher ed = higher income, why?

Answer 13

1. fewer educated workers
2. more productivity
3. compensating difference

Question 14

market imperfections

Answer 14

1. lack of job information
2. geopraphic immobility
3. unions and gov. restrictions
4. discrimination

Question 15

alt to min wage

Answer 15

1. piece rates
2. commisions/royalties
3. bonuses
4. stock options
5. profit sharing

Question 16

negatives to pay for performance

Answer 16

1. produce faster=poor quality
2. questionable sales practivce
3. who earns?
4. free riding
5. executive manipulation
6. no turnover

Question 17

economic rent

Answer 17

price paid for land/resources in fixed supply
assume:
1. single use
2. smae quality
3. competitive market
4. derived demand
5. demand is downward

Question 18

interest range of rates

Answer 18

1. risk
2. maturity
3. size of loan
4. taxability

Question 19

loanable funds theory of interest

Answer 19

supply when rates high, demand when rates low