11, 12, and 13 micro

Why is there unequal distribution of money between groups of families?

education/human capital, apparently data shows male lead families earn money than women lead, age

People who pass a means test can be entitled to government assistance, therefore government welfare programs are often called __ __.

entitlement programs

similarly, since there are many firms hiring labor, no single firm can influence the wage because:

even if they pay their workers more or less, they can't really affect the prevailing wage.

Even if a firm doesn't dominate a local labor market, it may have monopsony power over certain types of labor.

ex: a hospital could be the only large employer of nurses in a local market so they are a monopsony

medicaid and foodstamps are:

forms of in-kind assistance.

In a perfectly competitive labor market there are:

many sellers and buyers of labor services. Consequently, wage and salaries are determined by the intersection of the demand for labor and the supply for labor.

conclusion

measured by distribution of family money income, the richest families have become a little richer and the rest of the family groups a little poorer in recent decades.

Which of the following is an in-kind transfer payment? A) Medicaid. B) Social Security. C) unemployment insurance. D) Temporary Assistance to Needy Families.

medicaid

The perfectly diagonal line that is not the Lorenz curve represents

perfect equality; (20% of families receive 20% of income etc)

Market structure affects the:

price and quantity of a good/service that is sold by a firm to a consumer.

Social Security (OASDHI)

retirement money taken out of your check, payments additionally to disabled workers and survivors

MFC starts from the bottom of the supply curve of labor and then

rises above it

the poverty line:

separates those on welfare from those not on welfare. (X) equals three times an economy food budget.

Examples of cash assistance:

social security, earned-income tax credit, unemployment compensation, temporary assistance for needy families

How would a firm react to to a situation in which they hire fewer workers and pay higher wages?

substitute capital for labor or transferring operations overseas

What is the reason for a monopsony?

the absence of other firms in the area competing for relatively immobile labor because workers must acquire new skills to find work outside the company town market

human capital

the accumulation of education, training, experience, and health that enables a worker to enter an occupation and be productive.

Marginal product of labor

the additional output from hiring another unit of labor

What are wage differentials are determined by?

the demand and supply curves in a labor markets for various occupations.

example of wage differentials

the equilibrium wage rate for say a doctor is exponentially higher than a carpenter

Why are more people willing to work for higher wage rates?

the incentive of earning more makes up for the opportunity cost of giving up free time. Higher wages also attract people to a job that will come from similar industries and receive less there.

conclusion:

the negative income tax is the reverse of a positive income tax system, in which people pay the government an amount that varies directly with their income

The Law of diminishing returns

the principle that beyond some point the marginal product decreases as additional units of a variable factor are added to a fixed factor. (marginal product falls as the firm hires more workers)

collective bargaining

the process of negotiating labor contracts between the union and management concerning wages and working conditions.

production function

the relationship between the maximum amounts of output that a firm can produce and various quantities of inputs

Employers must deal with the union once one is established; if they deny unions demands

the union will strike and reduce the company's profits until the company agrees to a higher wage rate

characteristics of people who want income distribution:

they generally fear the link between the rich and political power; they believe the wealthy are capable of using money to influence politics to benefit the rich. results in unequal opportunity for various groups, people can ignore non-money incentives that motivate people like nationalism and pride.

what does a wage taker to to hit equilibrium?

they hire labor up to the equilibrium point at the market price, where the wage rate equals the third worker's marginal revenue product.

** self serving practices of unions to limit the labor supply or to raise wages can be disguised as standards of professionalism

they're more professional and how they're regarded

In a competitive labor market, no single worker can set their wage above the equilibrium wage:

this would make it very unlikely to be hired because other workers will work for a lower rate.

The official poverty line is defined as

three times the cost of a minimal food requirement.

What is one function of labor markets?

to determine the distribution of income/how wages and salaries are divided among members of society

What are the two primary objectives of unions?

to improve working conditions and to raise the wages of union members above the level that would exist in a competitive labor market.

The farther away the lorenz curve is bowed outward, the more __ distribution of money there is.

unequal

What are the factors causing changes in labor supply?

unions, demographic trends, expectations of future income, changes in immigration laws, and educating + training

What are the factors causing changes in labor demand?

unions, prices of substitute inputs, technology, demand for final products, and marginal product of labor

A firm hires additional workers up to the point where the MRP equals the __ __.

wage rate

in a perfectly competitive labor market, there are many sellers and buyers of labor services and consequently:

wages and salaries are determine by the intersection of the demand for labor and the supply of labor.

featherbedding

when unions force firms to hire more workers than necessary OR to impose work rules that reduce output per worker

The price (wage rate) paid to labor and the quantity of labor hired by firms are influenced by:

whether or not the labor market is competitive.

when you add the individual supply curves of labor for firms

you provide the market supply curve of labor

Poverty line

Established in 1964; the level of income below which a person or a family is considered to be poor.

In-kind transfers

Government payments in the form of goods and services, rather than cash, including such government programs as food stamps, Medicaid and housing

Examples of in-kind transfers

Medicare, Medicaid, Supplemental nutrition assistance program, and housing assistance (see 334 + 335)

Data about trends in income distribution families with income in the top 5% in 1929 earned 9% MORE of the total income pie than they did in 2014.

Since 1970, the poorest groups have gotten poorer and the rich have become richer.

How does the demand curve for labor conform to the law of demand?

Since its a curve showing the different quantities of labor employers are willing to hire at different wage rate

What are the criticisms of welfare?

Work disincentives, inefficiencies: more money in the pockets of bureaucrats than the poor, and inequities; different poor families don't receive the same treatment

Why did unions arise?

Workers realized that acting together gave them more bargaining power than acting individually and having to be at the mercy of their power.

wage taker

a company that has to pay the determined wage rate regardless of the quantity of labor it employs.

conglomerate merger

a merger between firms in unrelated markets

vertical merger

a merger of a firm with its supplies

conclusion

a monopsonist hires fewer workers and pays a lower wage rate than a firm in a competitive labor market

Deregulation

The elimination or phasing out of government restrictions on economic activity

Federal trade commission Act

The federal act that in 1914 established the Federal trade commission to investigate unfair competitive practices of firms.

Sherman Act

The federal antitrust law enacted in 1890 that prohibits monopolization and conspiracies to restrain trade.

Unemployment compensation

The government insurance program that pays income for a short time period to unemployed workers

marginal revenue product

The increase in a firm's total revenue resulting from hiring an additional unit of labor or other variable resource (the dollar value of worker productivity; the extra revenue a firm earns from selling the output of an extra worker)

In perfectly competitive markets, what are wage rates determined by?

The interaction of labor supply and demand

What model doesn't apply to union workers?

The perfectly competitive model

Predatory pricing

The practice of one or more firms temporarily reducing prices in order to eliminate competition and then raising prices.

comparable worth

The principle that employees who work for the same employer must be paid the same wage even when their jobs, even if different, require similar levels of education, training, experience, and responsibility. A non-market wage-setting process is used to evaluate and compensate jobs according to point scores assigned

Despite differences in wage rates, why is there a greater supply of less-skilled workers than greater skilled workers?

There's a difference in the required human capital needed to perform different jobs.

Why do companies form trusts

To gain more control of expanding industries by coming together. By forming this group they are able to control the industry and can charge monopoly prices and thence higher profits. (in past times trusts known as robber barons because they took everything in the way of their goal)

What do trusts like to avoid

competition

causation chain

decrease in the wage rate ---> increase in the quantity of labor an employer hires.

horizontal merger

A merge of firms that compete in the same market

means test

A requirement that a family's income not exceed a certain level to be eligible for public assistance

the supply curve of labor is consistent with the __ of __.

law of supply

example of differentiation of human capital

less human capital is required to be a carpenter than a doctor

Marginal cost pricing

A system of pricing in which the price charged equals the marginal cost of the last unit produced

conclusion

because the monopsonist can hire additional workers only by raising the wage for all workers, the marginal factor cost exceeds the wage rate

conclusion

A perfectly competitive firm's marginal revenue product is equal to the marginal product of its labor x the price of the product. MRP (marginal revenue product)= P(price) x MP (marginal product) MRP= P x MP

negative income tax

A plan under which families below a certain breakeven level of income would receive cash payments that decrease as their incomes increase

TANF

can't receive for longer than 60 months

Earned income tax credit

A refundable federal tax credit based on earned income below a maximum amount provided to low-income wage earners with the purpose of offsetting SS payroll taxes paid by the workers. Designed to avoid taxing working poor into further poverty.

Advantages of NIT system

1. bureaucratic costs would be cut bc it could be administered by a single agency 2. poor people would not suffer the stigma of repeatedly standing in line at the welfare office or using food stamps 3. cash subsidy is preferable to an in-kind transfer bc mot people know how to spend their money

to know how many workers a company should hire, you have to know:

1. how much workers contribute to the output that is demand for labor. 2. convert marginal product into dollars by calculating the marginal revenue product

What 3 strategies do unions use to raise wages?

1. increase demand for labor 2. decrease supply of labor 3. exert power to force employers to pay a wage rate above the equilibrium wage rate

Relative poverty

A level of income that places a person or family in he lowest say 20% of all people receiving incomes.

Reform for welfare, two broad approaches:

335-336

The poorest 20 percent of the U.S. population received approximately ____ of total income

5%

The highest fifth of all families receive approximately ____ of the distribution of annual money income among families

50%

14: not D, not A, C

7: not 80%, not 60%, 40

Clayton Act

A 1914 amendment that strengthens the Sherman act by making i illegal for firms to engage in certain anticompetitive business practices.

Robinson-Patman act

A 1936 amendment to the Clayton act that strengthens the Clayton Act against price discrimination

Celler-Kefauver Act

A 1950 amendment to the Clayton act that prohibits one firm from merging with a competitive

trust

A combination or cartel consisting of firms that place their assets in the custody of a board of trustees

Demand curve for labor

A curve showing the different quantities of labor employers are willing to hire at different wage rates in a given time period, ceteris paribus. It is equal to the marginal revenue product of labor.

supply curve of labor

A curve showing the different quantities of labor workers are willing to offer employers at different wage rates in a given time period, ceteris paribus.

Absolute poverty

A dollar figure that represents some level of income per year required to purchase some minimum amount of goods and services essential to meeting a person's of a family's basic needs.

Lorenz Curve

A graph of the actual cumulative distribution of income compared to a perfectly equal cumulative distribution of income.

Monopsony

A labor market in which a single firm hires labor

Which of the following statements is true? A) Discrimination against women and blacks reduces the demand for these workers resulting in lower wages paid these workers. B) Discrimination is no longer a problem in the United States. C) A negative income tax system is a plan where everyone pays the same percentage of their income as taxes. D) A negative income tax system is a plan where those below a certain income receive a cash payment from government.

A) Discrimination against women and blacks reduces the demand for these workers resulting in lower wages paid these workers.

Which of the following countries has the most unequal distribution of income?

Brazil

Order countries from least income inequality to most: Brazil, Czech Republic, US

Czech Republic, US, Brazil (income inequality is usually greater in less developed countries)

Example of a monopsony

If a town relies on a single employer

Example of derived demand

If consumers are not willing to purchase products requiring electronic components (like a bank teller machine) than there is no MRP(increase in revenue from buying another resource) and firms won hire more workers to make electronical components for them. however if demand for these machines goes up the price will go up and the MRP will also go up; the result is a right ward shift in the market demand curve for labor (I have crippling depression)

What direction is the supply of labor curve facing for a monopsonist?

It is upwards facing rather than horizontal (because a monopsonist is the only firm hiring workers so it faces the industry or entire supply curve of labor for that particular market.

What does the Lorenz curve mostly measure?

It was a tool for measuring income distribution in 1905; vertical axis measures cumulative percentage of family income and the horizontal axis measures the cumulative percentage of families from poorest to richest.

The combination of other total family -total money income points between 1 and 100 percent forms the __ __

Lorenz curve

conclusion

The Lorenz curve has shifted only slightly inward, and therefore closer to the perfect equality line between 1929 and 2014. (this means there has been a reduction in inequality since 1929)

Marginal factor cost (MFC) curve

The additional total cost resulting from a one-unit increase in the quantity of a factor

rule of reason

The antitrust doctrine that the existence of monopoly alone is not illegal unless the monopoly engages in illegal business practice.

Per se rule

The antitrust doctrine that the existence on monopoly alone is illegal, regardless of whether or not the monopoly engages in illegal business practices.

What is the poverty line based on?

The cost of a minimal diet multiplied by 3 because low income families spend about 1/3 of their income on food

Derived Demand

The demand for labor and other factors of production that depends on the consumer demand for the final goods and services the factors produce.

Federal programs to assist the poor are in 2 categories; in-kind transfers and __ __

cash assistance

The Lorenz curve shows the:

actual cumulative percentage of income received compared to a perfectly equal cumulative percentages of income.

Who are the poor

generally people who live in the south, families headed by a female, lack of education

According to the statistics, the distribution of money income:

has not changed greatly since 1929 (X) has not changed greatly since 1947.

Food stamps and Medicaid are examples of:

in-kind transfers

The shaded area is a measure of the degree of __ __

income inequality; a bigger shaded area means greater inequality/more bowed outward, smaller is more equal income distribution/flatter curve

why do unionists restrict the supply of labor?

it increases their wage rate; they use their power to shift the supply curve of labor leftward (by using devices to reduce union membership)