Microeconomics: Final Exam Chapter 14-15

Measuring Inequality

Lorenz curve

In the United States, the official definition of the poverty line traces back to a single person: _______________, whose idea was to______________. Mollie Orshansky; define a poverty line based on the cost of a healthy diet Lawrence Ellison; define a range of government policies to reduce poverty Molly Orshansky; define a range of government policies to reduce poverty Max Lorenz; define the Lorenz curve to illustrate the poverty line

Mollie Orshansky; define a poverty line based on the cost of a healthy diet

poverty trap

antipoverty programs set up so that government benefits decline substantially as people earn more income—as a result, working provides little financial gain

How many workers can firms hire at market wages

as many as they want

Individual labor supply curve

backward bending

Labor supply has what choice

between income and leisure

labor unions

changes balance of power between employers and workers

egotiations between unions and a firm or firms is called______________________.

collective bargaining

If immigration consists of mainly high-skilled workers, then a(n)____________in immigration will _______________the wages of high-skilled workers.

decrease; increase

With respect to market forces and/or labor markets that determine peoples' wages, which of the following is a true statement? labor markets consider how much a family needs for health care market forces consider what happens to families in their business decisions labor markets consider how much a family needs for necessities labor markets create considerable inequalities relating to income

labor markets create considerable inequalities relating to income

The ________________shows the amount of time an individual is willing to work at various wage rates:

labor supply curve

income effect

leisure is less expensive -higher wages --> less work

substitution effect

leisure is more expensive -higher wages --> more work

a firm will hire workers up to the quantity at which the wage rate equals the: marginal revenue product of labor. average physical product of labor. marginal factor cost of labor. price of the last unit of output produced.

marginal revenue product of labor

gary becker

markets can provide incentive to discriminate but wont necessarily

policies designed to improve equality: will always lead to less economic output. will always increase economic output. may either improve or reduce incentives for economic output. will reduce social support for markets.

may either improve or reduce incentives for economic output

In the town of Micro City, a single employer dominates the labor market. This is an example of:

monopsony

how long can a person receive TANF

no more than 5 years in a lifetime

monopsony

one employer in a labor market (or one option for an employee)

poverty line

specific amount of income one requires for a basic standard of living

TANF requirements

states must show they are directing money to programs that fulfill 1 of 4 aims: -helping needy families -getting recipiants into jobs -reducing out-of-wedlock pregnancies -encouraging 2 parent families

In the United States: wealth distribution and income distribution are approximately equal. income distribution is less equal than wealth distribution. wealth distribution is less equal than income distribution. income distribution plus tax incentives are equal to wealth distribution.

wealth distribution is less equal than income distribution

immigration and wages

when supply of workers rise the quantity goes up but wages go down -overall will raise per capita income

gender wage gap

women take on child bearing and take in the role of being the parent

economic discriminations

workers of equal ability and productivity are paid different wages

Which of the following is NOT a measure of income? your earnings this week from your part-time job your household's earnings during last year your assets as of April 1, 2018 your earnings for the month

your assets as of April 1, 2018

why is labor derived

it is derived form the demand for the product

assumptions to competitive labor markets

-firms operate in competitive industries -all workers are equal (productivity)

fixes to the wage gap

-more flexible jobs -men taking on more responsibility with children

economics of immigration

-overall economic gain -impacts differ in specific markets -politics of immigration has to consider many things

In-Kind transfers

-poverty trap -discourages savings

policies to reduce inequality

-redistribution (progressive tax system) -provide ladder of opportunity (improved childhood education) -tax on inheritance (raising estate tax)

other labor market issues

-simple model not predict wages -compensating differentials -efficiency wages

causes of inequality

-skill based technological change -family composition (2 higher earners vs single) -globalization -decline in labor unions -increasing firm consolidation -superstar (+ executive) effects -fundamental nature of capitalism

policy options

-tanf -in-kind transfers (SNAP, Medicaid) -EITC -basic income

monopsony vs perfect competition

a monopsony hires fewer workers and can pay a lower wage

The decline in union memebership in the US has been contributed to all of the following except: Globalization and increased competition from foreign producers. The U.S. legal environment making it more difficult for unions to organize. Steadily increasing average wages leading to less desire for bargaining power. The shift from manufacturing to service industries.

Steadily increasing average wages leading to less desire for bargaining power

Compared to a competitive labor market, a bilateral monopoly will result in: a higher level of employment and higher wages. a lower level of employment and lower wages. a higher level of employment and lower wages. a lower level of employment and indeterminate wages.

a lower level of employment and indeterminate wages

uppose that new high-technology farming equipment is developed. These new machines are substitutes for low-income workers such as farm laborers, but they are complements for high-income workers such as farm technicians and farm owners. This new technology will _________wages in for low-income workers and_____________income inequality. increase, decrease increase, increase decrease, decrease decrease, increase

decrease; increase

discrimination by race

differential treatment accounts for at least 1/3 of blacks

overstate poverty

doesn't take into account of benefits

key concerns on poverty and inequality

externalities, impact on growth, institution's impact, society's impact

Compared with a competitive labor market, a monopsonist hires _____________ workers and pays __________wages.

fewer; lower

Assume that the going wage for a worker at a competitive firm is $50 a day. If the marginal revenue product for the sixth worker is $45 a day, the: sixth worker should be hired. firm is maximizing its profits. firm should hire fewer than six workers. competitive firm can change the wage.

firm should hire fewer workers

key to labor demand

firms wont pay a worker more than the value of what they produce -higher workers until MB=MC

basic income

giving everyone a certain amount of money on a regular basis -no categorical eligibility requirements

Lorenz curve

graphs the cumulative shares of income received by everyone up to a certain quintile

The earnings gap in the U.S. labor market between black and white workers_________________.

has diminshed since 1960, but a gap still remains

recipient requirements for TANF

have to work or be in school

understating poverty

healthcare, rent, transportation

A Lorenz curve refers to a graphic illustration of the share of population on the_____________and the cumulative percentage of total income received on the_______________. left quintile; right quintile right quintile; left quintile horizontal axis; vertical axis vertical axis; horizontal axis

horizontal axis; verticle axis

In a perfectly competitive labor market model, an increase in the minimum wage would lead to what response in the labor supplied to the market, ceteris paribus?

increase the number of workers seeking work

A situation of__________arises when one group receives a higher share of total income or wealth than others.

inequality

earned income tax credit (EITC)

phased out slowly to reduce poverty trap

the market labor supply curve is

positively sloped

When reference is made to the___________, it means the specific amount of income needed for a basic standard of living.

poverty line

what happens when workers are more productive

raises demand which raises wages

In circumstances dealing with poverty, the term______________means taking income from those with higher incomes and providing income to those with lower incomes.

redistribution

If a society decides to reduce the level of economic inequality, which of the following would not be a tool that would help it meet this goal? impose a tax on the value of inheritances redistribute from those with high incomes to those with low incomes try to assure that a ladder of opportunity is widely available reduce spending on the social safety net.

reduce spending on the social safety net

The group of government programs that provide assistance to the poor and the near-poor is synonymous with which of the following? safety net safety quintiles poverty net antipoverty net

safety net

Which of the following is a key requirement imposed under the 1996 Welfare Reform Act's antipoverty program? states receiving TANF grants must impose work or school attendance requirements no one can receive TANF benefits for more than 3 years while attending school no one can receive AFDC benefits for more than 5 years over their lifetime states receiving AFDC benefits must impose work or school attendance requirements

states receiving TANF must impose work or school attendance requirements

The demand for labor is considered a derived demand, since it depends on:

the consumer demand for the output produced

poverty rate

the percent of the population below the poverty line in any given year

An assumption of the competitive market for labor is: the workers are all equally productive capital is more important than labor larbor markets are monopsonistic there is no equilibrium wage rate

the workers are all equally productive

If Congress voted every few years to redefine completely what poverty means, it will be useful to have a poverty line whose basic definition changes a lot. then it will set two poverty lines that it applies to welfare and the near-poor. then a substantial share of the U.S. population will subsist in dire poverty. then it would be difficult to compare poverty rates over time.

then it would be difficult to compare poverty rates over time

If incomes rise for both low-income and high-income workers, but rise less for the high- income workers,__________________. then poverty will rise and inequality will fall then poverty will fall and inequality will rise. then poverty will rise and inequality will rise. then poverty will fall and inequality will fall.

then poverty will fall and inequality will fall

collective bargaining in a union sector is expected to cause wages: and employment to be higher than in the nonunion sector. to be lower but employment to be higher in the nonunion sector. and employment to be lower in the nonunion sector. to be higher but employment to be lower in the nonunion sector.

to be higher but unemployment to be lower in the nonunion sector

market labor supply curve

upward sloping -more people come in as wages increase