ECON FINAL
What is the productivity standard for the distribution of income?
Below
What are the sources of productivity and which one is the most difficult to acquire?
-talent -experience -training talent is the hardest to acquire because you either have it or you don't
What are the determinants of demand elasticity of labor?
1. The greater the price elasticity of demand for the final product 2. The easier it is to employ substitute inputs in production 3. The larger the proportion of total costs accounted for by the particular variable input 4. The longer the time period available for adjustment
What percent of income is earned by the lowest households in the U.S?
3.2%
What percent of wealth is owned by the richest americans?
35%
What is outsourcing?
A firms employment of labor outside the counrty that the firm is located in.
What does the Lorenz curve show?
A geometric representation of the distribution of income. A lorenz curve that is perfectly straight represents complete income equality. The more bowed a lorenz curve, the more unequally income is distributed.
When is an individual's income at it's peak?
About 50
What are the determinants of differences in income?
Age, marginal productivity, experience, talent, training
What is the purpose of the supplemental social security income program?
Establishes a minimum income for the disabled or people who do not qualify for social security benefits.
What is a flow/stock variable?
Flow- over a period of time Stock- a certain time`
When does a firm stop hiring more labor?
If marginal revenue falls, so does the demand for labor.
What does the shape of the lorenz curve indicate about income distribution?
Income equality
What factor is omitted in the calculation of income for the lorenz curve?
Income in Kind
What is income in kind defined as?
Income recieved in the form of goods and services
What is the egalitarian principle of income distribution?
Income should be distributed equally to everyone
What is derived demand?
Input factor demand derived from demand for the final product being produced.
What is the shape of the lorenz curve today versus that of the 1920s?
It's higher than it was in the 1920s.
What is economic discrimination against minorities?
Paying minorities lower wages
What does the marginal productivity theory suggest about wages?
People are paid equilibrium value
How is income distributed in the U.S?
People with lower incomes recieve income in kind (gov. benefits)
What is diminishing marginal physical product of labor?
Predicts that additional units of a variable factor will after some point, cause marginal product to decline, with holding other things constant.
What does the learning curve suggest about productivity?
Productivity will increase as people lower effeciency
What is the net long run effect of outsourcing for the United States?
Tends to reduce U.S wages and employment.
What curve represents a competitive firm's demand curve for labor?
The Marginal Revenue Product Curve
`What is marginal physical product?
The change in output resulting from the addition of one more worker. The marginal product of the worker equals the chande in total output accounted for by hiring the worker, holding all other factors of production constant.
What is marginal factor cost of labor?
The cost of using an additional unit of an input. Ex: if a firm can hire all the workers it wants at the going wage rate, the marginal factor cost of labor is that wage rate.
Under what conditions would a firm hire more labor?
The firm hires workers up to the point at which the additional cost asociated with hiring the last worker is equal to the additional revenue generated by hiring that worker.
What is human capital investment?
The investment in education
What is marginal revenue product?
The marginal product times the marginal revenue. The MRP gives the additional revenue obtained from a one unit change in labor input.
What is the difference in hiring practiced by a monopolist and a perfectly competitive firm?
The monopolist must take into account the declining product price that must be charged in order to sell a larger number of product. Monopolized markets will produce less than a perfectly competitive market so they must hire fewer workers.
What is the shape of the labor supply curve faced by a perfectly competitive firm?
The supply curve slopes upward and when faced with a perfectly competitive firm, the firm itself faces a perfectly elastic supply curve
What is the least cost combination of resources?
To minimize total costs for a particular rate of production, the firm will hire factors of production up to the point at which the marginal product per last dollar spent on each factor of production is equalized.
Who is practicing outsourcing?
U.S and Canada
What influence does a perfectly competitive firm have on the wages it pays its workers?
Under perfect competition, equilibrium wage rate is determined where demand for labour is equal to supply of labour. In other words, under perfect competition, a labourer will get wage equal to its marginal revenue productivity in the long run.
In which country is income inequality the greatest?
United States
What is the age earning cycle?
Usually starts with low income, builds gradually to a peak around age 50, then gradually goes to zero at retirement
What is the relationship between human capital and wages?
Wages will eventually increase
What is the difference between the distribution of money income and the distribution of wealth?
Wealth- skills, knowledge, innovative talents Income- money made
What is the major cost of college education?
the opprotunity cost of not finishing
What does relative poverty refer to?
Defining poverty based on who you are with
What is the incidence of absolute poverty reduced by?
Doing nothing, real incomes increase over time. People will eventually make more than the definition of poverty.
What does "to each exactly the same" refer to?
Equality/Egalitarian principle of distribution
What type of income distribution does the 45 degree angle line represent?
Complete equality
