last econ

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  1. Marginal Product of Labor (MPL)
    • additional stuff from another worker 
    • Change of quantity over change in change in labor
  2. wage
    MPL times price=price
  3. marginal productivity theory of factor price determination
    wage is the marginal revenue product
  4. Marginal Revenue Product of Labor
    • How much revenue one more worker gets you 
    • Change of total revenue over change in change in labor 

    MR(price in perfectly competitive)*MPL
  5. relationship between MRPL and wage
    • MRPL> w, additional worker increase profit 
    • MRPL< w, additional worker decrease profit 
    • MRPL= w, current # max profit
  6. Demand for labor curve shifts with change in
    • -tech that change production 
    • -price of product produced 
    • -# of firms that produce product
  7. Hiring principle
    • Hire until MRPL= wages 
    • demand for labor- companies that hire 
    • supply for labor- workers themselves
  8. Substitution Effect
    Work increases when wages increase because opportunity cost of leisure increases
  9. Income effect
    Work less when wage increases because you're richer and buy more (nominal goods) "free time"
  10. Backward bending Labor supply curve
    Sub effect dominates the bottom to middle portion 

    Income effect dominates near the top portion
  11. Oligopoly
    • smaller number of sellers
    • output depends on what everyone else does 
    • Shift demand curve by quantity provided by competitor in market
  12. Profit Maximizing
  13. Comparison to perfectly competitive and monopolistic

  14. Nash Equilibrium
    outcome where no party/player wants to change their strategy
  15. Dominant Strategy
    play regardless f what competitor does
  16. Prisoner's dilemma
    rational strategy of self interest result in inferior/ inefficient outcome for both
  17. Monopoly
    • price setter
    • set MR=MC and then go up to demand curve 
    • profit bounded by demand and ATC 
    • Marginal Revenue is half as steep as demand
  18. Monopolistic Competition
    • Monopoly with entry of firms 
    • profits must be zero in LR eq'm
  19. Downward sloping demand curve
    • Product differentiation
    • prices must be lower in order to sell more 
    • prices must be higher to sell less
  20. Transition to LR
    • entry shifts demand left 
    • exit shifts demand right 
    • keep happening until posit=0 when P=ATC
    • demand and ATC must touch
  21. Price Discrimination
    • 1st degree- No consumer surplus b/c price set to marginal benefit 
    • 2nd- monthly fees and usage fees (cell phone plans)
    • 3rd- Student discounts
  22. Low world Price
    gain in consumer surplus & loss in producer surplus= gain from trade

    Difference in quantity= amount imported
  23. High world price
    loss in consumer price & gain in producer surplus= gain from trade 

    difference in quantity= amount exported
  24. Tariff
    • tax on good, raise price and loss in consumer surplus
    • less will be imported 
    • 2 triangle of DWL 
    • rectangle= government revenue
  25. Quota
    • Limit on quantity, difference between quantity is quota
    • higher price, lower quantity 
    • 2 triangle DWL, rectangle=license holder surplus
Card Set
last econ
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