ECON 202 Test 4

Understand Derived Demand for Labor to recognize it is in a multiple choice

A factor of production or intermediate good that occurs as a result of the demand for another intermediate or final good

Cartel

A formal agreement among firms (or countries) in an industry to set the price of a product and establish the outputs of the individual firms (or countries) or to divide the market for the product geographically.

Herfindahl Index

A measure of the concentration and competitiveness of an industry; calculated as the sum of the squared percentage market shares of the individual firms in the industry

Homogenous oligopoly exists when

A small number of firms are producing virtually identical products, setting price and output independently, producing virtually identical products.

Perfect Market Competition

All firms sell an identical product. All firms are price takers. Market share has no influence on prices.

Why would the market supply curve for labor be upward sloping?

As wages in one industry rise relative to wages in other industries, workers shift their labor to the relatively high-wage one. An increased quantity of labor is supplied in that industry.

Monopolistic competition resembles pure competition in what way.

Barriers to entry are either weak or nonexistent.

Why are monopolistically competitive industries inefficient?

Because it has market control and faces a negatively-sloped demand curve. Monopolistic competition does not efficiently allocate resources

Non-price competition refers to...

Competition between companies that focuses on benefits, extra services, good workmanship, product quality - plus all other features and measures that do not involve altering prices

Imperfect market competition

Competitive market situation where there are many sellers, but they are selling heterogeneous (dissimilar) goods

Economies of scale

Factors that cause a producer's average cost per unit to fall as output rises

Labor unions may attempt to raise wage rates by doing what?

Forcing employers, under the threat of a strike, to pay above-equilibrium wage rates.

What have real wages in the United States done in the long run?

Have increased at about the same rate as increases in output per worker

What happens if a number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes?

Individual firms would now be operating at outputs where their average total costs would be higher.

Why do critics of minimum wage argue that is a poorly target device?

It causes employers to hire fewer workers, and it does little to prevent household poverty.

A profit maximizing firm employs resources to the point where

MRP = MRC

What does marginal revenue product measure?

Marginal revenue measures the increase in revenues from selling an additional unit of a good or service, which helps management determine if it is in the best interest to produce and sell more

What is another name for the MRP curve for labor?

Marginal value product

In the short run, a profit-maximizing monopolistically competitive firm sets price (P) at what? What about the long run?

May realize either profits or losses in the short run, but realize normal profits in the long run

The restaurant, legal assistance and clothing industries are each illustrations of what type of market structures?

Monopolistic competition.

In long run equilibrium, a monopolistically competitive producer achieves product efficiency, allocative efficiency, neither or both?

Neither

What is the long run trend of real wages?

Real earnings per worker can increase only at about the same rate as the economy's rate of growth.

Resource pricing is important because:

Resource prices are a major determinant of money incomes; resource prices allocate scarce resources among alternative uses; resource prices, along with resource productivity, are important to firms in minimizing their costs.

The labor demand curve for a purely competitive seller slopes which direction?

Slopes downward because the elasticity of demand is always less than unity

What is one of the major problems that four firm concentration ratios fail to take into account?

The localized market for products.

What is the benefit to offering commissions or royalties to workers as pay?

They resolve a principle-payment problem as incentive pay, it ties worker compensation closer to performance.

price elasticity of a monopolistically competitive firm's demand curve

Varies directly with the number of competitors, but inversely with the degree of product differentiation

What does mutual interdependence mean within the context of oligopolies?

Various decisions such as output, price, advertising, and so on, depend on the decisions of the other firm(s).

In the United States professional football players are paid more than professional soccer players? What would explain this differential?

Wage Determination

What happens when two resources are complementary and there is an increase of Price in one?

Will result in a negative movement along the demand curve of one and cause the demand curve for the other to shift inward

Why has the productivity and real wages of workers in industrially advanced economies risen historically?

Workers have been able to use larger quantities of capital equipment

Is education a form of human capital?

Yes, it is a knowledge or skill that makes someone productive.

inter-industry competition

the competition for sales between the products of one industry and the products of another industry