Econ 211 Final Exam Review
T/F- market supply curve is negatively sloped at higher wages meaning it attracts more workers
false - positively slopes
T/F- income distribution is more unequal than wealth distribution in the US
false, wealth distribution is more unequal
example of common property resource
fisheries, highways
political left on poverty
focus on equity- make income and wealth more equitable through expanding public education, house, subsidies and health care
political right on poverty
focus on growth, incentives to work reduce government welfare increase growth overall, make the "pie" bigger, not more equal
the poverty threshold is the US are largely based on an adjusted measure of prices of which category or categories of goods?
food
role of asymmetric information
when one party to a transaction knows more than another party, you know your health better than your insurance company does
What is FU money?
"goodbye" to your boss
premium insurance
how much you pay every month/ year
which policy would rawls not support?
a reduction in capital gains taxes benefiting high income earners
according to gary beck's theory on economic discrimination, employers who successfully discriminate in their hiring practices will
earn less profits because they must pay more for labor
carbon trading
effects are not local (if coal plant reduces sulfur dioxide, surrounding areas benefit- if a state reduces CO2 levels, the state does not benefit anymore than the rest of the world)
Lorenz Curve
the graphical measure of income inequality
T/F - US poverty rates are correlated with race, through black and hispanic poverty rates
true
T/F - climate change has reached a sense of urgency as scientists predict catastrophic consequences if greenhouse gases are not contained
true
T/F - for competitive firms the profits are maximized when labor is hired to the point where VMPL= the wage rate
true
T/F- discriminating firms earn a lower profit than non discriminating firms because they are paying higher wages. in the long run, it does not pay to discriminate
true
T/F- income effect dominates substitution effect at higher wages
true
T/F- substitution effect dominates income effect at lower wages
true
Where is the substitution effect on an individual supply for labor graph?
it is the lower portion before the turning point, increases
What are the four factors of production?
land, labor, capital, entrepreneurship
is rawls the political left or right
left
generational equity
little immediate impact on our lives, benefits future generations
what is "poor" defined as
living on $2 a day
global equity
rich countries biggest sacrifice, poorer countries will receive the biggest benefit from effects to reduce the impact of global warming
is nozick the political left or right
right
non wage aspects in supply of labor
safety, flexible schedules (for child care reasons), ability to work from home
positive consumption externality
shift demand to the right
negative production externality
shift supply to the left
if immigration into the US increases, the labor supple in the US will shift________ and the wage rate will_____.
shift to the right, and decrease
market based policies
taxes, subsidies, tradable permits
sustainable definition
the ability to meet the needs of the present without compromising the ability of the future. generations to meet their own needs
why isn't "zero emissions" generally an economically efficient level of pollution?
the marginal abatement cost would greatly exceed the marginal damage from emissions
what percentage of people in US are affected by poverty?
15%
example of a public good with exclusion
cable tv
command and control
central agency sets the rules for emissions levels allowed, technologies, and enforcement procedures abatement costs become compliance costs
Jeff owns a small business installing home security systems prices at $1,000 each. By himself, he can install four systems per month. If he hires an assistant, a total of ten systems can be installed. If he hires two assistants, a total of fifteen systems can be installed. Assuming that the prices stays the same, what is the marginal revenue product of the first assistant and the marginal revenue product of the second assistant?
$6,000; $5,000
what is gary beckers theory?
(1930-2014) explained demographic changes and criminal behaviors by focusing on the economic incentives. He argues that discrimination is economically detrimental to all parties
how did knoxville no longer become a non-attainment region
- buses run on natural gases - interstates signs encourages averting behavior
characteristics of a lorenz curve
- cumulates households of various income levels on the horizontal axis - cumulates the share of total income on the vertical axis - the more bowed the lorenz curve the greater the income of inequality
what are causes for income inequality?
- differences in human capital, as hgih-paying jobs require much more education and skills than before - discrimination that keeps wages low for certain groups of workers - rise of 2- earner households, which has increased overall household income
causes for market failure
- externalities - existence of public goods - common property resources
causes of poverty and income inequality
- human capital (education and ability - discrimination - stagnant wages - poor are financially punished for being poor (buying in bulk, not given loans) - health problems - bad luck
changing the world of work
- increased labor forced participation by women - 2 earner families have increased - telecommuting, flexible work days - family benefits (paid family leave=0) - low skilled jobs are filled by temporary work visas in the US - 185 types of visas
traditional causes of poverty
- lack of human capital - mental or physical disability - drug addition - what comes first the addition or the poverty? - unwillingness to work of apathy toward work - refusal to relocate for work
Characteristics of a competitive labor market
- many buyers and sellers - homogeneous product - easy entry and exit - all workers are equally productive - information is available and accurate
civil rights act of 1964
- no discrimination on color, race, religion, sex, or national origin
what are the four shifts in supply of labor
- non wage income - demographics - non wage aspects - wages in competing labor markets
privileges along the way from living comfortably, above poverty line
- parents can work less and spend more time with child or pay for quality child care - child lives in wealthier environment - more likely to attend better schools= better prepared for college - can focus on school only in college
New factors causing poverty
- wages have not kept up with rising costs - technological changes and globalization have changed employment opportunities - health costs are rising - rise in single parent families
life cycle effects
- young people typically earn modest incomes - income peaks between 45- 55 - income declines with retirement (as do costs)
if the distribution of income in an economy is perfectly equal, what would its gini coefficient be?
0.00
the gini coefficient for the US
0.480
Which Gini coefficient corresponds to a Lorenz curve that is bowed furthest away from the 45-degree line?
0.71
what percent of students that attend ivy leagues are from the top 1%
60%
percentage breakdown of distribution of income
67.8% - wages 9.8% - proprieties income 4.6%- rent 14.3% - corporate profits 3.5% - net income
marketable or tradable permits
A regulatory body sets a maximum allowable quantity allowed, typically called the cap, and issues permits granting the right to pollute a certain amount. These permits can be bought and sold; hence the common term cap and trade.
command-and-control policy
A security control that is inherited by one or more organizational information systems. (vehicle emissions standards)
market based policies
Charges, taxes, subsidies, deposit-refund systems, or tradable emission permits achieve the same ends. Examples include effluent charges, user charges, and bottle deposits.
what does FIRE stand for?
Financial Independence Retire Early
examples of private goods
Food, Homes, Clothing, airline ticket
OECD
Organization for Economic Cooperation and Development
what is the formula for marginal revenue product?
MRPL= MPPl x MR
What is the formula for the value of marginal product of labor
MRPl= MPPL x P= VMPL
personal or family distribution of income
The distribution of income to individuals or family groups (typically quintiles, or fifths, of the population).
T/F - higher the gini coefficient, the more unequal
True
income definition
a flow measure reflecting the funds received by individuals or businesses over a specific period
immunizations
a free rider problem
emission taxes
a tax on every unit of pollution produced to achieve the socially efficient outcome
if you spend 15% of your income on food, where are you on the poverty line?
above the poverty line
law of large numbers
allows for everyone to have insurances
externality
an action or transaction that affects a third party who is not a party to it - can be a positive externality (benefits other outside the market) - can be a negative externality (costs of others outside the market) - can be caused by production of consumption
Ronald Coase (1910-2013)
argued that private markets are the most efficient way to solve externality problems
is knoxville a non-attainment region?
as of 2017, knoxville is no longer a non-attainment region
what are unions?
associations that bargain with employers over the terms and conditions of work. jobs in the future focus more on services, such as health care, transportation, and information technology
what shape is the graph for an individual supple for labor
backward bending
beckers theory on non discriminating firms-
can hire from a larger supply of workers are lower wages, resulting in lower costs and greater profits
Elinor Ostrom (1933-2012)
challenged the conventional solutions to the tragedy of the commons
what type of good are highways
common property resource
non rivalry
consumption by one does not reduce that good's or service's utility of others
American with Disabilities Act
discrimination based on physical or mental disabilities is prohibited
environmental policy
deals with the incentives faced by policy makers who wish to align public interests wirh business interests
Where is a firm's demand for labor derived from?
demand for its product (price) and the productivity of labor
What determines how much you get paid?
depends on the marginal productivity
poverty definition
developed in the 1960s based on the USDA's foodplan (spend 1/3 on food)
why is health care so expensive?
doctors are paid for doing more high-tech interventions especially more intensive and expensive interventions, insured customers demand more than they would if they were paying full price
equal pay act of 1963
equal pay for equal work
paying $5 on amazon to stream a movie is an example of a service that is ______ in consumption
excludable and nonrival
conversation
forgo paper financial statements and printed newspaper and books, use LED or compact fluorescent bulbs
nonattainment in knoxville
from "state of the air 2013" knox county received a grade "D" in ozone and a "fail" in annual particle pollution, knoxville was a non-attainment region for both in 2013
social costs/ benefits
full resource costs/benefits of an economic activity, including externalities
when ronald's hourly wage increased from $12 to $15, this allowed him to reduce the number of hours worked so that he can spend more time studying, what is TRUE. about ronald's individual labor supply at this point?
his income effect is stronger than his substitution effect
what is the value of the marginal product of labor?
in competitive labor markets, the firm is a price taker, which means MR=P
the coase -
in the presence of an externality, if transaction costs are small, the resulting allocation of resources will be efficient regardless of the initial allocation of property rights
which factor is LEAST likely to shift the labor supply curve for the web designers
increase in productivity of web designers as a result of improved software
wages in competing labor markets
industry with higher wages will attract more workers
which is TRUE regarding the coase theorem?
it doesn't matter which party to the transaction is assigned the property right
do you think MLB player salary is equal to marginal revenue product?
they are paid more than the MRP
the clean air act of 1970
mandated fewer auto emissions and the processes to recude those emissions
what is the economically efficient level of pollution?
marginal benefits= marginal costs
what does MPPL stand for?
marginal physical product of labor
policy options- command and control
market incentives can often be bypassed through direct regulation - govt specifies the required outcome and the process by which it is to be achieved
what is rawls maximum principle
maximize the minimum, redistribution
wealth definition
measure of an individual's or family's assets, net of liabilities, at a given time
what is a result of economic discrimination?
members of different groups are segregated into different occupations
command and control makes very harmful substances such as
mercury and raditation
Beckers theory of discriminating firms-
must pay higher wages for "preferred" workers, resulting in higher costs and lower profits
example of a public good
national defense, clean air, free riding
is pollution a negative or positive externality?
negative
is emissions standard a market based policy?
no
public beaches
non excludable by rival
market failure
occurs when a market outcome does not provide the socially optimal level of output
Non-excludability
once a good or service is provided it is not possible to exclude others from enjoying it
depth of poverty
one measure of poverty depth is the income deficit, the difference between the poverty threshold and a family's income
non wage income characteristics
passive income, examples include rental properties, stocks, interest earned, inheritance. this decreases the supply curve because of greater income(less work)
deductible insurance
payment each visit
another name for the emission tax
pigouvian tax
Demographics in supply of labor characteristics
population, immigration, labor force, participation rates
is getting the flu shot a negative or positive externality?
positive
what was beckers conclusion?
pressures of market competition should drive discrimination to zero in the long run
private costs/ benefits
private costs are costs incurred solely by an individual or firm as a result of their own activities; private benefits are benefits enjoyed solely by an individual or firm as a result of their own activities
technology to deal with global climate change is a public good:
private firms find it difficult to fund it when others free ride on their inventions
what type of a good is an Amtrak train ticket
private good
what type of good is dollywood?
private good
age discrimination in employment act of 1967
protects workers over 40 from age discrimination
which of these is the best example of common property resource
public recreational park
nozick's theory
redistribution of wealth is not good, there will be no incentives and people will not work hard
health care
related to public goods, not excluded, not taken away from other people - the emergency room care when it is not busy
"herd immunity"
requires a large portion of the population to be immunized
executive order 11246
requires affirmative action in hiring women and minorities
functional distribution of income
splits income among the factors of production
share of income by quintile
the US distribution of income has grown more unequal over the past 3 decades. every income quintile except the highest has declined in percentage of income
marginal physical product of labor
the additional output from adding one more worker
Marginal revenue product
the amount of addition revenue one workers earns for the firm
how do progressive taxation and redistribution policies affect the lorenz curve and gini coefficient?
the lornz curve becomes less curved and the gini coefficient decreases
supple of labor
the time an individual is willing to work at various wage rates
public good
type of market failure
individual social
ways to prove
if the marginal damage curve is above the marginal abatement cost curve at the current quantity of emissions, the socially optimal amount of emissions
will be less than the current amoutn
what is income effect?
workers choose fewer hours when wages rise and more hours when wages fall. extra income means less desire/need for work
what is substitution effect?
workers choose more hours as wages rise opportunity cost of leisure
economic discrimination
workers of equal ability and productivity are paid different wages or are otherwise discriminated against- this is illegal