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Micro Economics Final
Terms in this set (32)
Industry consists of a large number of small firms selling products that are similar but not identical
The percentage of industry sale volume produced by a single firm
restaurants and small retail store
What are some examples of monopolistic competition
Ways to make your product different from your competitors
subjective differences, real physical differences, service, location, price
What are examples of product differentiation?
1929, harold hotelling
When and who was hotelling paradox created by?
Concept that pertains to economic difference and argues product differentiation .
Having 5 gas station on a main road and only one in a rural area. Having 5 ice cream stands in one area of the boardwalk instead of spread all over.
What are some examples of hotelling paradox?
demand for labor based on demand for product being produced.
change in output as a result of hiring one more employee
marginal product of labor
change in revenue from hiring one more worker
marginal revenue product of labor
marginal product vs wage. if mrp> wage hire. if mrp<wage don't hire.
what is the decision rule used by an employer to determine if an additional unit of labor should be hired?
increase in demand for product produced. increase in worker productivity. increase in use of a complimentary factor of production.
what causes increase in demand for labor?
decrease in worker productivity. decrease in demand for products. increase in use of a substitute factor of production
what causes a decrease in demand for labor?
anything that a worker does to increase your productivity. ex: education, training, experience
increase in popularity of the job. a possibility of higher future income.
how does a change in supply of labor increase the equilibrium wage?
lots of retirement. limited training facilities
how does a change in supply of labor decrease the equilibrium wage?
natural resources that has a single owner. ex: yard, land, pond on my land.
private property resource
incentives exist so that private property resources are well managed today and in the future
why do incentives exist on private property resource?
natural resources that is owned in common by everyone. ex:pacific ocean, lake michigan and air.
common property resource
lack of incentives. poorly managed today and into the future(overused.)
what are the incentives of common property resource?
single person bears an opportunity cost of management vs society at large gets future benefits.
how do common property resources get over used in a market economy?
characterized by rivalry in use: your use of a private good prevents me from using the same good. seller can exclude a non payer. ex: sweater, car, coffee,hamburger
goods that once provided can be consumed equally by everyone, whether you pay or not. ex: radio, tv
non rivalry: your use of a public good does not prevent me from using and enjoying the same public good. non excludability: seller can not exclude a non payer from using good. ex: lighthouse and beam of light
what are public goods characterized by?
person who consumes a public good without paying. consumers
free rider and the incentive to free ride
cable tv, sports,concerts
non rivalry, your use of a collective good does not prevent me from using the same good. seller can exclude a non payer.
what are collective goods characterized by?
Incur production costs one time. ex: concert every consumer must buy a ticket.
why is is possible to earn positive economic profit from production of a collective good?
Incentive to free ride. IF too many free rides not enough revenue is collected. ex: national defense ,gov forces people to pay
why is there a tendency for public goods to be under provided in a market economy?
Your consumption of a public good depends on contributions of others.
What does your consumption of a public good depend on?
That consumers get more of the same product at where the seller feels is the best location, not necessarily where consumers need them.
What does hotel paradoxing
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