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Micro Final Exam
Terms in this set (28)
Labor's Marginal Revenue Product
The derived demand and, consequently, the demand curve for labor are determined by
What concept implies that a firm's marginal revenue product curve for labor will slope downward in the short run?
diminishing marginal returns
If a firm is using labor hired in a perfectly competitive market, and if the wage exceed the marginal revenue product of labor at the current level of employment,
fewer workers should be used.
Which of the following most clearly illustrates the concept of "derived demand"?
An increase in the demand for new houses leads to an increase in the demand for construction workers.
Suppose a change in technology increases the marginal product of labor. The result is
a rightward shift in the demand for labor curve.
A decrease in the marginal product of labor would be represented by:
decrease in labor demand.
A decrease in the demand for a product will cause
both the demand for and wages of the workers used to produce the product to decline.
The supply curve of truck drivers is upward sloping and demand curve is downward sloping. An increase in the price of hauling freight by rail relative to the price of hauling freight by truck will ____ the equilibrium wage of truck drivers and ____ the number of drivers employed.
An increase in the price of labor would cause
producers to substitute other inputs for the labor.
An example of a non-pecuniary job characteristic is
a comfortable work environment.
Which of the following is most likely to decrease the market wage rate in a job category?
- The employer provides a generous pension plan.
-The work is widely viewed as safe and not stressful.
- The job is widely viewed as interesting and prestigious.
Which of the following would be most likely to cause an increase in the wage rate for a particular job?
An increase in the danger of this job.
Which of the following is most likely to cause the productivity of labor to increase?
a higher rate of investment in human and nonhuman capital
Which of the following is the best example of an investment in human capital?
on-the-job training received by an apprentice electrician
The major determinant of an individual's income is
how productive he is combined with demand for what he produces.
Assume that empirical evidence shows a difference in mean earnings between two groups, say, majority and minority workers. What conclusion may be drawn?
Any of the above statements could, either partially or entirely, explain this difference.
When employment discrimination results from the personal prejudices of employers, economic theory suggests that
competitive forces will tend to reduce discrimination.
Economic efficiency requires that
all economic activity generating more benefits than costs be undertaken.
Markets may have difficulty providing the proper quantity of a public good because
individuals will tend to become free riders, and private firms will have difficulty generating enough revenue to produce an efficient quantity of the good.
Markets fail when externalities are present
because some of the costs and benefits of producing a good are not reflected in the market price.
example of a public good?
an effective antimissile system that defends a country against a nuclear attack
If the consumption of a good by one individual does not change the amount of the good available to others, the good is considered to be
Manny's Bar-n-Grill is next door to a franchised fast-food restaurant near a busy freeway exit. Essentially, the menus, food quality, atmosphere, and service are equal at the two restaurants. Nevertheless, the nationally franchised restaurant can attract more customers, even though its prices are higher. This situation
is one in which the national franchise provides uninformed consumers with valuable information that reduces their risk of being unsatisfied with the purchase.
New products provide a classic case of the consumer information problem. However, in some cases consumers partially solve the problem by trusting the "brand name" of the producer of the new product. Because firms spend millions of dollars advertising and maintaining their brand names, the likelihood of a "brand name" firm intentionally selling a dangerous or shoddy new product is
low because the firm with a brand name has a lot to lose if word spreads about bad consumer experiences.
The Coase Theorem argues that private bargaining will result in an efficient solution if:
Property rights are well defined and transactions costs are small
Problem areas for the Market
Externalities, public goods, and imperfect information
Spill over (3rd party cost)
- Too much is produced ( Producing units where MB < MSC
- Price is too low
- Internalize the externality (1. Legal damages 2. Pigou Tax)
More elastic is the demand for a product, more elastic is the demand for the resources (labor) used to make that product TIME
Recommended textbook explanations
Krugman's Economics for AP*
David Anderson, Margaret Ray
Solutions Manual to Accompany Essentials of Investments
Alan J. Marcus, Alex Kane, Zvi Bodie
Principles of Microeconomics
Managerial Economics & Business Strategy
Jeff Prince, Michael Baye
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