Intro to Factor Markets
The demand for a factor of production is a _________ demand
derived
The optimal output rule for factor markets is __________________
MRC=MRP
If too little is being produced or consumed, Qm<Qso, and deadweight loss will point to the ______
right
This occurs when goods are nonexcludable and individuals have no incentive to pay for their own consumption, so they instead leech off of anyone who does pay
The free-rider problem
The improvement in labor created by education and knowledge that is embodied in the workforce
Human capital
The value of the additional unit of output generated by employing one more unit of that factor is the __________________________________
Value of the Marginal Product of Labor
In a monopsony graph, the supply curve is the same as the _______ curve
wage
Buying and smoking cigarettes is an example of what kind of externality
Negative Consumption Externality
A can of Dr. Pepper is an example of what type of good
Private good
(rivaled and excludable)
This is a number that summarizes a country's level of income inequality based on how unequally income is distributed across the quintiles
The Gini Coefficient
What curve is perfectly elastic in a labor market's typical firm
Supply curve
(same as wage and MRC for the typical firm)
In a monopsony graph, the demand curve is the same as the _______ curve
MRP
Raising bees that pollinate the neighbor's flowers is an example of what kind of externality
Positive production externality
National defense is an example of what type of good
public good
(non-rivaled and non-excludable)
Wage differences across jobs that reflect the fact that some jobs are less pleasant or more dangerous than others
Compensating differentials
Sarah owns a small flower shop and the industry is perfectly competitive. She is considering whether or not to hire an additional worker. The wage rate for the worker is $500 per week; the marginal product of the additional worker would be 100 units per week; and the price of the units produced is $10 per unit. What should Sarah do?
Hire the additional worker, because the value of the marginal product exceeds the wage.
Monopsonies tend to pay _______ wages and a _______ quantity of workers than in a perfectly competitive labor market
lower; lower
To handle positive consumption externalities, the government might impose a __________ to the ________
subsidy; consumers
Depletion of a good is commonly a result for what type of good
Common Resource Goods
(Rivaled, yet nonexcludable)
(*think: Tragedy of the Commons)
Taxes designed to reduce external costs/negative externalities
Pigouvian taxes
Maria operates a persimmon orchard in southeastern Oklahoma. She pays her workers $248 per week to pick and process persimmons, and she sells her persimmons for $6 per bushel. If she adds one more worker and that worker can pick and process 44 bushels per week, what will be the profit for Maria from hiring that worker?
$16
In a standard monopsony with a linear, upward-sloping labor supply curve, how much faster does MRC rise than supply
Twice as fast
The space between the marginal social cost curve and the marginal product curve represents what
the marginal external cost
(esp. present in negative production externalities)
Streaming services are an example of what good
Artificially scarce goods
(Non-rivaled, but excludable)
This states that even in the presence of externalities, an economy can always reach an efficient solution as long as transaction costs are sufficiently low
The Coase Theorem