Term
| Where does pure monopoly exist? |
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Definition
| When a single firm is the sole producer of a product for which there are no close substitutes. |
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Term
| Main characteristics of pure monopoly? |
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Definition
| It's a: Single Seller (is the industry), No Close Substiutes, Price Maker (control supply), Blocked entry, Nonprice competition |
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Term
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Definition
| factors that prohibit firms from entering an industry |
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Term
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Definition
| high fixed costs; large economies of scale & 1 firm meets market with lowest price |
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Term
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Definition
| output price determination; no supply curve |
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Definition
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Term
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Definition
| charges buyer highest price as possible results in imbalance |
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Definition
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Term
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Definition
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Term
| Pure competition is effective |
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Definition
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Term
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Definition
-large number of firms
-differentiated products
-competition on quality, product price, and marketing
-free to enter and exit industry |
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Term
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Definition
| each firm makes a product that is slightly different from the products of competing firms. |
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Term
| the firm's short-run and output decision |
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Definition
A firm that has decided the quality of its product and its marketing program produces the profit maximizing
quantity at which its marginal revenue equals its marginal cost (MR = MC).
Price is determined from the demand curve for the firm's product and is the highest price the firm can charge for the profit-maximizing quantity. |
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Term
| long run: zero-economic profit |
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Definition
In the long run, economic profit induces entry.
And entry continues as long as firms in the industry earn an economic profit—as long as (P > ATC).
In the long run, a firm in monopolistic competition
maximizes its profit by producing the quantity at which its marginal revenue equals its marginal cost, MR = MC. |
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Term
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Definition
| the demand for a resource that depends on the demand for the products it helps to produce |
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Term
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Definition
| additional ouptup resulting from using each additional unit of labor; equal to the change in total product divided by the change in quantity of a resource employed. |
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Term
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Definition
| the change in total revenue resulting from the use of each additional unit of a resource |
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Term
| rule for employing resources |
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Definition
| Marginal Revenue Product (MRP) EQUALS Marginal Revenue Cost (MRC); This is the principle that says: to maximize profit, a firm should employ the quantity of a resource at which its MRP (marginal revenue product) is equal to its MRC (marginal resource cost), the latter being the wage rate in a purely competitive labor market |
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Term
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Definition
| indicates that a firm will purchase more of an input whose relative price has declined and use less of an input whose relative price has increased; that is, (1) the change in the quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods that are substitutes ;(2) the effect of a change in the price of a resource on the quantity of the resource employed by a firm |
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Term
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Definition
| indicated that a firm will purchase more of one particular input when the price of the other input falls and less of that particular input when the price of the other input rises; that is, The situation in which an increase in the price of one input will increase a firm's production costs and reduce its level of output, thus reducing the demand for other inputs; conversely for a decrease in the price of the input. |
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Term
| elasticity of resource demand |
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Definition
| A measure of the responsiveness of firms to a change in the price of a particular resource they employ or use; the percentage change in the quantity of the resource demanded divided by the percentage change in its price.; in other words, it measures the sensitivity of producers to changes in resource prices |
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Term
| least cost combination of resources |
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Definition
| this is when when the last dollar spent on each resource yields the same marginal product; this is occurs when the The quantity of each resource a firm must employ in order to produce a particular output at the lowest total cost; the combination at which the the ratio of the marginal product of a resource to its marginal resource cost is the same for the last dollar spent on each of the resources employed. |
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Term
| profit macimizing combination of resources |
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Definition
| when each resource is employed to the point at which its marginal revenue product equals its resource price |
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Term
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Definition
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Term
| marginal productivity theory of income distribution |
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Definition
| income gets distributed according to contribution to society's ouput |
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Term
| profit-maximizing combination of resources |
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Definition
| The quantity of each resource a firm must employ to maximize its profit or minimize its loss: The combination in which the marginal revenue product of each resource is equal to its marginal resource cost. |
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Term
| marginal productivity theory of income distribution |
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Definition
| The contention that the distribution of income is equitable when each unit of each resource receives a money payment equal to its marginal contribution to the firm's revenue (Its MRP) |
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Term
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Definition
| price paid for the use or services of labor per unit of time |
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Term
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Definition
| amount of money received by a worker per unit of time; money wage |
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Term
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Definition
| the amount of goods and services a worker can purchase with his/her nominal wage; purchasing power of the nominal wage |
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Term
| purely competitive labor market |
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Definition
| a resource market in which many firms compete with one another in hiring a specific kind of labor, numerous equally qualified workers supply that labor, and no one controls the market wage rates. |
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Term
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Definition
| a market structure with only a single buyer of a good employer of a factor of production. |
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Term
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Definition
| the practice of a labor union of restricting the supply of skilled union labor to increase the wages received by union members, the policies typically employed by a craft union. |
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Term
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Definition
| the laws of state or local governments that require that a worker satisfy certain specified requirements and obtain a license from a licensing board before engaging in a particular occupation. |
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Term
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Definition
| The practice of a labor union of including as members all workers employed in an industry. |
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Term
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Definition
| a market where there is a single seller (monopoly) and a single buyer (monopsony) |
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Term
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Definition
| the difference between the wage received by one worker or group of workers and that received by another worker or group of workers |
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Term
| marginal revenue productivity |
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Definition
change in a firms total revenue when it employs 1 additional unit of a resource (everything else remaining constant)
=change in revenue/q of resources employed |
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Term
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Definition
| collections of workers who do not compete with each other for employment because the skill and training in one group are substantially different from those of the workers in the other group. |
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Term
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Definition
| the knowledge and skills that make a person productive |
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Term
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Definition
| differences in the wages received by workers in different jobs to compensate for nonmonetary differences between the jobs. |
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Term
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Definition
| a conflict of interest that occurs when agents (workers or managers) pursue their own objectives to the detriment of the principals' (stockholders') goals |
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Term
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Definition
| a compensation structure that ties worker pay directly to performance. such plans include piece rates, bonuses, stock options, commissions, and profit sharing |
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Term
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Definition
| the lowest wage that employers may legally pay for an hour of work |
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Term
| American Federation of Labor-Congress of Industrial Organizations (AFL-CIO) |
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Definition
| largest federations of labor unions in the United States |
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Term
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Definition
| loose federation of American unions that includes service workers and teamsters and has total membership of 6 million workers |
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Term
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Definition
| U.S. labor unions not affiliated with the AFL-CIO |
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Term
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Definition
| percentage of a particular population of workers that belong to labor unions; percentage of workers by represented workers that belongs to labor unions; the percentage of the population of workers who |
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Term
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Definition
| negotiation of labor contracts between labor unions and firms or government entities |
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Term
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Definition
| place of employment where only workers who are already members of a labor union may be hired |
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Term
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Definition
| place of employment where employer may hire either labor union members or nonmembers but nonmembers must become member within period of time of lose job |
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Term
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Definition
| place of employment where employer hires labor union members or nonmembers but nonmembers must pay union dues or donate |
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Term
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Definition
| stat law that makes it illegal to require worker to join a labor union in order to retain job; laws making union and agency shops illegal |
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Term
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Definition
| place of employment where employer may hire nonunion workers and workers need not become members of a labor union |
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Term
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Definition
| the withholding of labor services by an organized group of workers (a labor union) |
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Term
| Marginal revenue product (MRP) equation |
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Definition
Marginal Revenue Product =
(change in real revenue)/
(unit change in resource quantity) |
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Term
| marginal resource cost (MRC) equals? |
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Definition
Marginal resource cost =
(change in total resource cost)/
(unit change in resource quantity) |
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Term
| Why is studying resource pricing important? |
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Definition
| Money-income determination, cost minimizatoin, resource allocation, policy issues |
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Term
| Resource prices help determine ___ |
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Definition
| money incomes, and they simultaneously ration resources to various industries and firms |
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Term
| the demand for any resource is derived from ____; that means, |
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Definition
| the product it helps product; the demand for the resource will depend on its productivity and on the market value (price of the good it is producing) |
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Term
| marginal revenue product is ____. |
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Definition
| the extra revenue a firm obtains when it employs 1 more unit of a resource. |
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Term
| The marginal revenue product curve for any resource is _____ because the firm ____. Thus each point on the MRP curve indicates ____. |
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Definition
the demand curve for that resource;
equates resource price and MRP in determing its profit-maximizing level of resource employment;
how many resource units the firm will hire at a specific resource price |
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Term
| Law of diminishing returns |
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Definition
| s the decrease in the marginal (per-unit) output of a production process as the amount of a single factor of production is increased, while the amounts of all other factors of production stay constant. |
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Term
| A firm is employing the profit maximizing combination of resources when each resource is _____. In terms of labor and capital, that occurs when the ______; that is when (eqn) |
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Definition
used to the point where its marginal revenue product equals its price;
MRP of labor equals the price labor and the MRP of capital equals the price of capital – that is, when
(MRP of labor)/(Price of labor)- = (MRP of capital)/(Price of capital) = 1 |
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Term
| marginal productivity theory of income distribution holds that all ___. Critics say that such an income distribution is too unequal and that real world market imperfections result in _____. |
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Definition
resource are paid according to their marginal contribution to output.
pay above and below marginal contributions to output. |
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Term
| any specific level of output will be produced with the least costly combination of variable resources when the ___ |
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Definition
marginal product per dollar’s worth of each input is the same. That is, when
(MP of Labor)/(Price of labor) == (MP of Capital)/(Price of capital) |
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Term
| The elasticity of demand for a resource will be greater when ___: |
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Definition
(a) the greater the ease of substituting other resource for labor
(b) the greater then elasticity of demand for the product
(c) the larger the proportion of total production costs attributable to the resource |
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Term
| How to name ALL ELASTICITIES IN ECONOMICS: |
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Definition
When the elasticity is greater than 1, it’s elastic
If it’s equal to one, it’s unit elastic
If it’s less than one, it’s inelastic |
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Term
| Coefficient of a the elasticity of resource demand is ___ |
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Definition
| E_{rd} == (% Change in resource quantity demanded)/(% change in resource price) |
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Term
| The elasticity of demand for a resource measures ___ |
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Definition
| the responsiveness of producers to change in the resource’s price. |
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Term
| The majority of the 10 fastest occupations in the US – by percentage increase – relate to ____; the 10 most rapidly percentage decrease are however ___ |
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Definition
| health care and computers; more mixed (review talbe 12.5 and 12.6) |
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Term
| If resource C and D are complimentary or jointly demanded then ___; a change in the price of C will change ___. |
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Definition
| theres only an output effect; the demand for D in the opposite direction. |
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Term
| . If resources A and B are substitutable for each other, a decline in the price of A will ____. But if the output effect exceeds the substitution effect a decline in the price of A will ___. |
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Definition
| decrease the demand for B provided the substitution effect is greater than the output effect; increase the demand for B. |
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Term
| The demand curve for a resource will shift as a result of |
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Definition
(a) a change in the demand for, and therefore the price of, the product the resource is producing;
(b) changes in the productivity of the resource;
(c) changes in the prices of other resources |
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Term
| 4. The firm’s demand curve for a resource slopes downward because____. When a firm is selling in an imperfectly competitive market the resource demand curve falls for a second reason: ___. The market demand curve for a resource is derived by ___. |
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Definition
| the marginal product of additional units declines in accordance with the law of diminishing returns; Product price must be reduced for the firm to sell a larger output; summing horizontally the demand curves of all the firms hiring that resource. |
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