Microeconomics Final Exam

*P theory*

A, poor people

LIMITATIONS TO BECKER'S THEORY

Adjustment costs of firing unproductive workers and hiring new workers can be high. Women may be less mobile than men and less willing to accommodate employer's demands (such as travel). Women may continue to choose more flexible career paths that do not penalize extended absences from the labor market.

what is an externality?

An action or transaction that affects a third party who is not a party to it

What is a union?

An organization of workers that negotiates with employers, as a group, over wages and working conditions.

Which is not a reason for the decreased rate of labor force participation among men in the United States since the 1940s?

Companies are subject to federally imposed quotas of how many men they can hire.

*bonus #2*

D

Which statement(s) is(are) true? I. A major source of income inequality in the United States stems from differences in education levels. II. Differences in the number of earners in a household is not a source of income inequality in the United States. III. Differences in spending habits is a major factor in explaining income inequality.

I only

Which of these is(are) true? I. The tragedy of the commons is MOST associated with pure private goods. II. Highway congestion is an example of the tragedy of the commons because a new driver fails to consider the external costs of his using the road. III. The tragedy of the commons is NOT an example of market failure.

II only

THE COASE THEOREM

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. The socially optimal level of production will be resolved no matter whether polluters are given the right to pollute or victims are given the right to be free of pollution.

What effect did the Taft-Hartley Act of 1947 have on the U.S workforce?

It gave states the power to let workers decide whether or not they wanted to join a union if the workplace already had a union.

Which statement does NOT explain the Coase theorem?

It states that efficient results will occur if both parties share the property rights equally.

Gary Becker's controversial The Economics of Discrimination concludes that...

Labor discrimination harms firms that practice it due to increased labor costs.

Most major league baseball players tend to earn wages:

Less than their marginal revenue product

equation for marginal revenue product

MRP = MPP x MR

what is another term for emission taxes?

Pigouvian taxes

Wagner Act (1935)

Prohibited a variety of unfair labor practices, including firing workers for engaging in union activities

If the marginal damage caused by a certain type of pollution is $100 billion and the marginal cost of abatement is $180 billion, then:

society would be better off if emissions were increased.

*which is not a market based environmental*

standards

substitution or income? both up or both down

substitution

*chapter 11*

supply and demand curve

The value of the marginal product of labor is the marginal product of labor multiplied by...

the price of the item the firm produces.

A ___________ is a situation where firms can hire nonunion individuals, but those nonunion workers are required to join the union soon after being hired.

union shop

A profit-maximizing firm, operating in a perfectly competitive market, will add new units of labor until the...

value of the marginal product equals the wage.

*MRP = what?*

wage rate

Which income associated with a factor of production currently comprises the largest proportion of U.S. income as of 2000?

wages

*in the U.S.*

wealth distribution is less equal than income distribution

*basic difference between income and wealth is*

wealth reflects assets of lifetime & income earned in year

From 1960 to 1973, poverty rates in the United States:

were cut in half.

If the supply of labor decreases, which of the following events will occur?

The wage rate will increase and firms will decrease employment to the point where MRP equals the new wage rate.

*2 questions w/ labor activities*

both: demand to right

*USA pays more for insurance *

but worse

Public goods represent a market failure because

by their very nature they are nonexcludable and nonrival which makes it difficult for the private sector to supply them profitably.

*Bonus #1*

c

*an increase in technology will cause labor demand to*

c

Unions can take a variety of forms. Companies can be required to hire workers who belong to a particular union prior to employment in what is called a(n)

closed shop

If the income distribution becomes more equitable, the Lorenz curve moves _____ the line of equal distribution of income and the Gini coefficient _____.

closer to; declines

Government requirements that automobile companies improve gasoline mileage every year is an example of:

command and control policies.

Rawls ----> Nozick ---->

communism capitalism

*Answer: cost of capital increase tech*

cost of capital increase tech

We assume that when a firm hires additional workers, the marginal physical product of labor will:

decrease because each worker now has less capital and other resources to work with.

As a result, of adverse selection problems in the health insurance market, it is likely that over time ________ .

fewer healthy people will be insured

*marginal revenue product*

formal: MPP x MR = MRP

The measurement of income distribution that splits income earned among the various factors of production (inputs) is called the

functional distribution of income.

*high elastic, price down 20% how does effect product?*

goes down more than 20%

Any society bound by a contract calling for an income distribution that would maximize the well‐being of the worst‐off member of society would allow for inequality if that inequality

had the effect of improving the lot of the very poor.

Which is not a reason for the increased rate of labor force participation among women in the United States since the 1940s?

health insurance companies refusing to offer spousal benefits more frequently

*what determines poverty thresh hold*

housing

*what determines poverty thresh hold?*

housing

The income deficit measures:

how far below the poverty threshold a household's income lies.

substitution or income? one up one down

income

*downward individual slope is a*

individual firm demand curve

*which of these is most significant to finding income disparity in the UAS*

individual investment in human capital

The idea that workers are divided into those who belong to a union and those who are unemployed or non-union is called the...

insider-outsider theory.

*US spends more on healthcare and results are*

more & less

The elasticity of demand for cucumbers is -3 while the elasticity of demand for salt is -0.2. Thus, ceteris paribus, the demand for labor to pick cucumbers will be _____ compared to the demand for labor to mine salt.

more elastic

the more negative the number means more or less elastic?

more elastic

Alternatively, states can pass laws that prohibit union shops by what are known as ______________ laws.

right-to-work

*problem with income defecit*

none

*fishing question*

nonexclusive rival

* wealth distribution *

not distributed

*not market based policy *

not vehicle emmission

The marginal product of labor is how much an additional unit of labor affects...

output.

*income deficite*

poverty thresh hold - family income

*which is not a market failure?*

private goods

how do you calculate the gini coefficient

ratio of area A to area A + B (or A/A+B+C)

* cap and trade *

reduced dioxide and acid rain answer has implemented

Suppose that a law passes that causes working conditions throughout the economy to improve. The labor supply curve should shift _____ and the number of workers available at any given wage rate will _____.

right; increase

*productivity & capital

shift right

An increase in technology will cause labor demand to...

shift to the right.

If a negative externality exists in a market, the marginal:

social cost exceeds the marginal private cost.

If the marginal abatement costs outweigh the marginal benefits of the pollution abatement:

society is better off if emissions are increased.

How do you determine elasticity of demand?

% change quantity / % change wage

*marginal indatement*

2,000

* quintile *

20 %

*on what worker*

3 worker

chart question

300, 300

BECKER'S CONCLUSION

: PRESSURES OF MARKET COMPETITION SHOULD DRIVE DISCRIMINATION TO ZERO IN THE LONG RUN

An equal distribution of income would yield a Lorenz curve that was a

45‐degree line between 0 and 100%.

*graph with MSC and MPC and y-axis is 15, 10, 5*

5

Which statement best describes the Civil Rights Act of 1964?

Discrimination in the form of differences in compensation or terms and conditions of employment because of an individuals race, color, religion, sex, or national origin is illegal

GARY BECKER (1930-2014)

Explained demographic changes and criminal behavior by focusing on economic incentives. Argued that discrimination is economically detrimental to all parties.

Which statement best describes Executive Order 11246?

Federal contractors are required to provide the federal government with details regarding the demographic characteristics of employees.

Which of these statements is(are) true? I. The official U.S. poverty threshold for an individual is an income of roughly $30 per day. II. The World Bank and other agencies define poverty as incomes of less than $20 per day. III. An individual in the United States with an income of $20 per day is defined to be in poverty by U.S. standards.

I and III only

_____ is when the consumption of a good or service by one person does not reduce the utility of that good or service to others.

Nonrivalry

Vaccinating people against a communicable disease such as influenza not only reduces the chances that the person vaccinated will catch the disease but also reduces the probability that an epidemic of the disease will occur. Which of the following statements is true?

Reducing the chances that the person vaccinated will catch the disease is a private benefit while reducing the probability of an influenza epidemic is a social benefit.

Which of the following is true regarding the tragedy of the commons?

The activity that leads to the tragedy of the commons is individually rational but collectively inefficient.

*CO2 question*

a - burning

The price of reducing emissions is called the:

abatement costs

When employees can either join the union or not, but must still pay union dues, this is known as:

an agency shop

*which of these is not a cause of income inequality?*

an increase in the number of manufacturing jobs

The idea that the labor market is divided into "male" and "female" jobs is called the...

job crowding hypothesis.

*Answer: job elasticity*

job elasticity

benefits of union membership

job stability, equitable wages, protection from vindictive management

*not new factor of poverty cause*

lack of human capital

John Rawls's maximin principle ___________ would most likely align with the political , and Robert Nozick's argument for not allowing government to use its coercive power to realign the income distribution would most likely align ___________ with the political .

left, right

costs of union membership

loss of individual work flexibility, strikes, monthly dues

*baseball player*

low income, high wealth

A perfectly competitive firm will hire workers up to the quantity at which the wage rate equals the:

marginal revenue product of labor.

The maximin principle, a theory from philosopher John Rawls in the 1970s, states that to help alleviate the societal problem of unequal income distribution, society must do what?

maximize the welfare of the least well‑off individual