Micro Final
If Ava had first-dollar medical insurance, how many days would she spend in the hospital?
She would spend as many days as her insurance would pay for aka where the demand curve is 0
In-Kind Transfers
direct transfers of goods or services ex: food stamps, medicaid, public housing, free/reduced school lunch
Winner-Take-All-Markets
markets in which small differences in human capital translate into large differences in pay
Marginal product of 14th worker = 8 and firms sells output at $4 per unit. Labor is the only variable cost, so the worker's marginal product =
$32
Health Maintenance Organization (HMO)
a group of physicians that provides health services for a fixed annual fee
Chris offered the following gamble: 0.1 probability of winning $90, 0.4 probability of $50, and 0.5 probability of losing $60. Expected value of gamble found by:
0.1*90+0.4*50-0.5*60
Which of the following isn't part of an individual's stock of human capital?
Employment Status
Value of Marginal Product
= marginal product of labor * net price of each unit sold
Labor Union
a group of workers who bargain collectively with employers for better wages and working conditions
If demand for the product you make were to suddenly decline, you would expect the equilibrium price of the product to fall, which would lead to:
a decrease in the VMP of each worker
One disadvantage of using the government to provide pure public goods is that everyone receives
a different amount of a public good and has a different reservation price for the public good
Collective Good
a good or service that is nonrival but excludable to some extend
Non-excludable Good
a good that is difficult of costly to exclude non-payers from consuming ex: fireworks display
Public Good
a good that's both nonrival and nonexcludable
Pure Private Good
a good that: non-payers can be easily excluded each unit consumed by one person means one less unit available for others
Nonrival Good
a good whose consumption by one person doesn't diminish its availability to others ex:national defense
Risk-neutral
a person who would accept any gamble that's fair or better-than-fair
Risk-averse
a person who would refuse any fair gamble
Earned Income Tax Credit
a policy under which low-income workers receive credits on their federal taxes
Means-Tested Program
a program that decreases benefits as the recipient's other income increases
Pure Commons Good
a rival good that's nonexcludable ex: fish in the ocean
Negative Income Tax
a tax credit for each person financed by tax on earned income low income families receive a cash transfer while high income families pay tax
Head Tax
a tax that collects the same amount from each taxpayer
Regressive Tax
a tax under which the proportion of income paid in taxes declines as income rises
Disappearing Political Discourse
a theory that holds that politicians who support a policy will remain silent to avoid being misunderstood
Human Capital Theory
a worker's wage is proportional to his human capital
Employer Discrimination
an arbitrary preference by an employer for one group of workers over another
Unionized Firms Competitive because
attract the most productive workers increase productivity
Customer Discrimination
causes buyers to pay more for goods produced by favored group for the same product
Compensating Wage Differentials
describe the difference in wage rates from differences in working conditions
Earning Differences caused by
education, intelligence, trustworthiness, experience, energy, initiative, training, work habits, and political skills
1996 Personal Responsibilities Act
gave cash grants to the states from the federal government to reduce welfare rolls and encourage self-reliance states determined criteria and put 5 year limit on benefits for recipients
Better-than-fair Gamble
has a positive expected value
Fair Gamble
has an expected value of 0
School districts in which relatively more parents choose to not have their children immunized:
have higher rates of the diseases for which immunization is normally required
Which argument against enacting workplace safety regulations can be justified using economic tools of observation?
if the value workers place on a safety device is greater than the cost of providing it, then firms in a perfectly competitive labor market will want to install the device
Pat goes to the electronics store to learn about audio equipment. He talks to a salesperson for an hour before leaving and ordering the equipment online for less. Pat's behavior:
illustrates the free-rider problem
If the marginal cost of pollution abatement differs across firms, then regulations that require all polluters to reduce pollution by a fixed proportion will be:
inefficient
When the federal government borrows money
interest rates will increase and private investment will fall
National defense is an example of a good that is:
largely nonrival and nonexcludable
Human Capital
the accumulated education, training, work habits and other assets that affect an individual's vmp
Provisions of ACA
nondiscrimination on the basis of preexisting conditions a mandate that all individuals need to buy health care coverage subsidies to low-income families
Adverse Selection
occurs because insurance tends to be purchased more by those who are most costly for companies to insure increases insurance premiums
Asymmetric Information
occurs when either the buyer or seller is better informed about the goods in the market
First-Dollar Coverage
pays all expenses for the insured's health care
Pork Barrel Spending
public expenditure greater than the total value created
Proportional Income Tax
requires all taxpayers to pay the same proportion of their incomes in taxes
Lemons Model
says that asymmetric information tends to reduce the average quality of goods for sale
Deadweight Loss
smaller if the good taxed has inelastic demand and supply
Ginger is going to buy a house and a dishwasher. Assuming the MC of searching for both is the same, Ginger will:
spend more time searching for the house than the dishwasher (the benefit of having more info tends to be greater for more expensive items)
Marginal Product of Labor
the additional output a firm gets by employing one additional unit of labor
The optimal amount of information to acquire before making a purchase is:
the amount such that the marginal cost of acquiring info equals the marginal benefit
Value of Marginal Product of Labor
the dollar value of the additional output a firm gets by employing one additional unit of labor; equal to wage in a competitive market
Workers Compensation
the government insurance system that provides benefits to workers injured on the job
Crowding Out
the reduction of private investment caused by increasing interest rates from government borrowing
Under a head tax, the amount of tax paid is:
the same for all tax payers
A proportional tax results in:
the same percentage of income going to taxes for all taxpayers
Expected Value of a Gamble
the sum of the possible outcomes times their respective probability
Moral Hazard
the tendency of people to expend less effort protecting insured goods
Rent Seeking
the term for socially unproductive efforts to gain a prize
Seller on an existing house claims it's in great shape and offers a 2-year warranty. His statements are:
true because offering a warranty is a costly-to-fake signal
One reason nonunionized firms don't always drive unionized firms out of business is that:
unionized firms hire more selectively, employing workers with greater human captial
Statistical Discrimination
uses group characteristics to infer individual characteristics
Labor Supply: Income Effect
wage increase = work less purchasing power increases for a given work schedule
Labor Supply: Substitution Effect
wage increase = work more leisure is more expensive
Logrolling
when legislators support each other's pork barrel projects
Free-Rider Problem
when non-payers can't be excluded from consuming a good ex: shopper talks to sales rep but buys product online
Optimal Amount of Info
where the marginal benefit = marginal cost