Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
25 Cards in this Set
- Front
- Back
|
2 basic ways to compare the advantages/disadvantages of a human capital investment
|
1- is the net present value positive or negative? - if positive then invest
2- compare the internal rate of return and the rate of investment - if the internal RoR > interest rate than invest |
|
|
internal rate of return
|
the investment in which the net present value returned on it is > 0
|
|
|
how is a college education measured?
|
a college education entails direct costs, which are out-of-pocket, and indirect costs, which are forgone earnings...but later is measured in incremental revenue
|
|
|
y is underemplyment and inefficient allocation of resources a problem in monopolies?
|
b/c P > MR and therefore VMP > MRP, due to the fact that extra employees expand production
|
|
|
monopsony
|
a firm in which a firm is the sole employer of a particular kind of labor
|
|
|
bilateral monopoly and the wage rate it sets
|
BM is a situation in which a strong labor union and a monopsonist occur in the same setting and the wage rate is indeterminate
|
|
|
cobweb model & y does it form this shape?
|
a market in which changes in labor demand occur and changes in labor supply lag behind it due to periods of training required
shape is formed b/c the supply lags behind demand and shortages and surpluses r incurred inb/t |
|
|
how do unions bargain to increase the wage by increasing the demand for labor in what ways?
|
1- increasing prod demand
2- increasing productivity 3- increasing the # of emploters 4- alter the prices of related inputs |
|
|
how do unions bargain to increase the wage rate by restricting labor supply?
|
1- reducing the # of qualified supliers of labor
2- influencing nonlabor income |
|
|
efficiency wage
|
a wage rate that reduces the employers costs per effective unit of labor hired
|
|
|
where does the optimal combination of wages and fringe benefits ly?
|
where the isoprofit curve is tangent to highest attainable indifference curve
|
|
|
principle-agent problem
|
occurs when agents pursue some of their own goals that are in conflict with achieving the goals of the principle
|
|
|
shirking
|
attempts by workers to increase utility by taking unauthorized breaks or by giving less than agreed-upon effort during work hours
|
|
|
different types of incentive pay plans
|
commissions
royalties- pay received as a percentage of sales revenue piece rates- compensation paid in proportion to the output produced by the employee tournament pay- prizes based on relative performance where top dog gets all the bones bonuses raise/promotions profit sharing- pay in which the employee receives a portion of the firm's profits equity compensation- options where part of an employee's earnings are invested in the company's stock |
|
|
free-rider problem
|
the incentive for employees to shirk while working in a group in which they will be compensated just the same as everyone else
|
|
|
what reduces the "price" of fringe benefits
|
1- purchased in economies of scale
2- after-tax considerations 3- efficiency considerations |
|
|
how do fringe benefits make a firm run more efficiently?
|
in a sense they "tie" the workers to their job and so keeping them there longer, so the firm is overall more experienced w/ limited turnover and runs efficient
|
|
|
how do efficiency wages reduce shirking in a firm?
|
they raise the opportunity cost of the job, the employee values their job more and the stakes are raised for getting canned
|
|
|
how does an implemented efficiency wage increase unemployment?
|
b/c theyre set higher than the market wage and the supply stays constant a shortage occurs - the higher the wage, the higher the unemployment
|
|
|
what is the Lorenz curve and what does it measure?
|
a graphical depiction of the earnings distribution
measures the percentage of wages allocated to the percentage of full-time workers |
|
|
Gini coefficient
|
total measure of earning inequality
GC = area b/t Lorenz curve & line of equality / total under the diagonal |
|
|
isoprofit normal profit curve
|
indicates the various combinations of wages and fringe benefits providing a given profit
|
|
|
indifference curve
|
a curve showing the various combinations of wages & fringe benefits that will yield some given level of utility to the individual
|
|
|
y do workers accept fringe benefits over cash?
|
1- the tax advantage (it saves them money, essentially their wages arent gettin taxed)
2- if accepting these then they wont spend as much of their real wages (helps to "lock in" health and pension benefits) |
|
|
cobweb model
|
model that depicts the slow changes that occurs when the labor supply model lags behind changes that occur in the labor demand model for a particlar job b/c of lengthy training periods
|
