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36 Cards in this Set
- Front
- Back
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Mutual Interdependence
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Actions of one firm will affect the entire market
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Collusion
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cooperating among firms to raise each others profits
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Cartel
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agreement among firms to resist output to achieve monopoly power
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Game Theory
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two players make one decision independently and at the same time, move of the other player is unknown
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Prisoners Dilemma
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game in which payoffs are such that the choice set that maximizes total welfare fails to maximize individual wellfare
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Derived Demand
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demand for a resource that depends on the demand for the products it helps to produce
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Marginal Revenue Product of Labor
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The change in total revenue from a one unit increase in labor
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Marginal factor cost
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change in total cost from one unit increase in labor
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perfect competition
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many small employers compete for many workers with identical skills, firms are price takers (wage takers) and face a perfectly elastic supply of labor
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monopsony
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1. a single buyer in an industry
2. faces the entire, upward sloping market curve 3. price makers, but as labor rises, wages rise as well |
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exploitation of labor
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using a persons labor without offering adequate compensation
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labor union
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group of workers organize to advance the interest of the group
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strike
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withholding of labor services by a labor union
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market failure
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inability of a market to bring about the socially optimum allocation of resources
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marginal social cost
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added costs imposed on society as a whole by additional unit of good
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marginal social benefit
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additional gain to society as a whole from an additional unit of a good
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MC-MB rule
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socially optimal quantity of a good occurs where MSC=MSB
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Negative externalities/external costs
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an uncompensated costs that an individual or firm imposes on others (MSC= S+Marginal External Cost)
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Positive externalities/external benefits
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uncompensated benefit that an individual or firm confers on others (MSB= D + Marginal external benefits)
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Subsidy
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payment designed to encourage activities which yield external benefits
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public goods
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goods that are non-rival and non-excludable
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Non Rival in consumption
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ones benefit doesn't impede available benefits to others
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non-excludabl
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good which supplier cannot prevent non-payers from obtaining benefits
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Free Rider Problem
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inability f potential providers of a good or service to obtain from those who benefit
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excise tax
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per unit tax levied on the production of a specific good
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characteristics of ogligopoly
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1. few, mutually interdependent firms
2. high barriers to entry 3. imperfect information |
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Cartel facts
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1. cartels are illegal in the US
2. can increase profits in all firms- regardless of product 3. when all members follow rules, firms split monopoly profit (best group outcome) |
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Incentive to cheat in a cartel
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more elastic
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factors that break down collusion
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-large number of sellers
-differenciated products -differences in costs -antitrust policy |
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effects of hiring a worker
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- quatity of output rises
-total revenue rises -total cost rises |
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union goals
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- maximize wages
-minimize employment |
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union actions
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advertise union, apprenticeship programs, lobby for inc. min wage, lobby for import restrictions, lobby for more immigration laws
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factors that increase demand for labor
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1. Increase in the demand for output
2. increase in members productivity 3. increase in the price of substitute labor |
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factors that decrease the Ed of demand of labor
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1. decrease in the Ed for output
2. decrease in the number of substitute inputs |
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role of government in the US
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1. define/enforce property rights
2. correct market failure 3. additional regulations |
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characteristic of public goods
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non-rival
non-excludable |
