EC 201 EXAM 3 ACKERMAN QUESTIONS
Labor Market - Answers :-wages determined in market (supply and demand critical)
-labor demand is marginal revenue product curve (hire until wage = MRP)
-labor supply opportunity cost (work until wage = leisure)
3 Factors that explain wage differences - Answers :supply, demand, institutions
Employers demand human capital - Answers :-empirical evidence = each year college
increases 8%
-mostly casual
Human Capital - Answers :accumulated knowledge and skills that make a worker more
productive
Education increases earnings - Answers :-human capital = increases productivity
-signaling - hard workers more likely to complete college
Demand for Superstars - Answers :-economics for superstars - huge audience, more for
best, huge profit for being best
-technology makes audience larger - authors
Labor Unions - Answers :-Represent workers who decide to negotiate jointly with
employers (increase bargaining power)
-workers unionized (12%) - public sector
Occupational Licensing - Answers :-licensing - credential required to work in an
occupation
-public policy safety and economics
Buyer's monopsony - Answers :-like monopoly, one seller, one buyer
-increase bargaining power of employers
economists debate importance
Monopsony power - Answers :firm using its power as a major buyer of labor to pay
lower wages
Discrimination - Answers :-Due to differentiated education, jobs, etc
-exists after controlling
-costly to firms - do not hire most productive worker - decrease profits
Permanent income - Answers :average lifetime income
-get paid more along carriers
-less inequality
Who is in poverty? - Answers :-all groups
, -higher among single parents, racial minorities, children
-elderly and full time workers unlikely to experience poverty
Poverty Dynamics - Answers :-few people in poverty - but many are in some point
-factors - divorce, childbirth
-more poor people in long tern cycle
- 1/2 fall into cycle
Insurance - Answers :payoff occurs when bad things happen to protect against hardship
-provided by government
Redistribution - Answers :-inequality in US large
-many people experience poverty
Redistribution of income - Answers :-diminishing marginal benefit - each added united
less beneficial than the previous one
-take from rich? - give to poor
Costs of redistribution - Answers :-administrative costs, taxes reduce work, risky
behavior, fraud, lobbying
Fairness - Answers :-policy debate ethics by notions of fairness
-equality of outcomes, opportunity
-fair processes - same rules apply
Supply - what employees want - Answers :-compensating differential
-take unpleasant jobs
Compensating differential - Answers :wage premium compensates workers for adverse
attributes of a job
Workers Demand for Compensating Differential - Answers :-Demand higher wages
(back breaking work, income uncertainty, working night shifts, risk death)
-accept lower wages for change of promotion, long vacations and satisfying work
Good fit job - Answers :-good job = good match
-about competitive advantage
-enjoy benefits of work
Minimum wage - Answers :lowest hourly wage employers are allowed to pay
Estimates of effects of minimum wage - Answers :raise wages, small disemployment
effect, poorly targeted social policy
Modeling competition - Answers :competition matters - numbers and uniqueness
product
Labor Market - Answers :-wages determined in market (supply and demand critical)
-labor demand is marginal revenue product curve (hire until wage = MRP)
-labor supply opportunity cost (work until wage = leisure)
3 Factors that explain wage differences - Answers :supply, demand, institutions
Employers demand human capital - Answers :-empirical evidence = each year college
increases 8%
-mostly casual
Human Capital - Answers :accumulated knowledge and skills that make a worker more
productive
Education increases earnings - Answers :-human capital = increases productivity
-signaling - hard workers more likely to complete college
Demand for Superstars - Answers :-economics for superstars - huge audience, more for
best, huge profit for being best
-technology makes audience larger - authors
Labor Unions - Answers :-Represent workers who decide to negotiate jointly with
employers (increase bargaining power)
-workers unionized (12%) - public sector
Occupational Licensing - Answers :-licensing - credential required to work in an
occupation
-public policy safety and economics
Buyer's monopsony - Answers :-like monopoly, one seller, one buyer
-increase bargaining power of employers
economists debate importance
Monopsony power - Answers :firm using its power as a major buyer of labor to pay
lower wages
Discrimination - Answers :-Due to differentiated education, jobs, etc
-exists after controlling
-costly to firms - do not hire most productive worker - decrease profits
Permanent income - Answers :average lifetime income
-get paid more along carriers
-less inequality
Who is in poverty? - Answers :-all groups
, -higher among single parents, racial minorities, children
-elderly and full time workers unlikely to experience poverty
Poverty Dynamics - Answers :-few people in poverty - but many are in some point
-factors - divorce, childbirth
-more poor people in long tern cycle
- 1/2 fall into cycle
Insurance - Answers :payoff occurs when bad things happen to protect against hardship
-provided by government
Redistribution - Answers :-inequality in US large
-many people experience poverty
Redistribution of income - Answers :-diminishing marginal benefit - each added united
less beneficial than the previous one
-take from rich? - give to poor
Costs of redistribution - Answers :-administrative costs, taxes reduce work, risky
behavior, fraud, lobbying
Fairness - Answers :-policy debate ethics by notions of fairness
-equality of outcomes, opportunity
-fair processes - same rules apply
Supply - what employees want - Answers :-compensating differential
-take unpleasant jobs
Compensating differential - Answers :wage premium compensates workers for adverse
attributes of a job
Workers Demand for Compensating Differential - Answers :-Demand higher wages
(back breaking work, income uncertainty, working night shifts, risk death)
-accept lower wages for change of promotion, long vacations and satisfying work
Good fit job - Answers :-good job = good match
-about competitive advantage
-enjoy benefits of work
Minimum wage - Answers :lowest hourly wage employers are allowed to pay
Estimates of effects of minimum wage - Answers :raise wages, small disemployment
effect, poorly targeted social policy
Modeling competition - Answers :competition matters - numbers and uniqueness
product
