Question

Define: normal profit.

2. Define: external diseconomies

3. Define: transactions costs.

4. Define: public goods.

5. Define: moral hazard.

6. Define: asymmetric information.

7. Define: a natural monopoly.

8. Distinguish between a progressive and a regressive tax.

9. Distinguish between the risk and uncertainty in economics

10. Define: marginal cost

11. What are the consequences of natural monopolies?

12. Explain why negative externalities like air pollution lead to too much production of the pollution-producing goods.

13. Explain why private, for-profit firms will not provide public goods.

14. In a supply and demand framework, describe the process or sequence of events that is likely to occur if the current price is below the equilibrium price.

15. Explain why according to neoclassical economics, a profit maximizing firm will increase its labor force up to the number of workers that equates the prevailing wage rate to the value of the marginal product of labor (the marginal revenue product of labor).

16. What factors account for the fact that labor markets are segmented rather than unified?

17. What are the consequences of occupational discrimination whereby some groups are crowded into a small number of occupations (e.g., women in nursing)?

18. Explain employers’ divide and conquer strategy as an explanation of discrimination.

19. Explain why, when a firm is producing the quantity that equates its average cost to its marginal cost, it is productively efficient.

20. Explain how the capital adjustment process affects the allocation of resources among industries and the social division of labor.

21. Describe the price adjustment process that would be set in motion in the bottled water market if a wide-spread drought were to hit the United States.

22. What factors might account for the fact that labor markets are segmented rather than unified?

23. What are the consequences of occupational discrimination whereby some groups are crowded into a small number of occupations (e.g., women in nursing)?

24. Explain employers’ divide and conquer strategy as an explanation of discrimination.

25. How does insurance, including social insurance like Medicare and Social Security, reduce risk and add economic value?

26. What’s wrong with the statement “I oppose universal health care coverage because I shouldn’t be required to pay for someone else’s health care”?

27. Unlike most methods of generating electric power, solar photovoltaic panels can be purchased by individual consumers and installed on the roof of their housing. The demand for them has increased, but their price has dropped. Explain what may be happening in this industry.

Questions 28 and 29 are based on the following:

Suppose Pres. Trump and the Republican Party successfully expel all 11 million undocumented residents of the United States this year. This would represent an abrupt decrease in the overall supply of labor of about 4%. Since undocumented workers are heavily concentrated in agriculture, construction and household services (like cleaning, child and elder care and lawn care) the percentage decline in the supply of labor to these industries would be in the 15% - 25% range.

28. Using a neoclassical price adjustment framework, explain what effects this would have in the most affected industries.

29. Suppose that this results in a decline in the rate of profit in the most affected industries. Using the capital adjustment mechanism, explain what is likely to happen (and why) in the most affected industries.

Questions 38 – 41 are based on the efficiency wage framework. The efficiency wage framework can be summarized with the following equation:

P = k{w/(Q/L)}

​

Where:

P K W Q

= Price = the mark-up ratio = the wage rate per hour = the quantity produced

L (Q/L) {w/(Q/L)}

= the hours of labor employed in production = output per hour of labor (labor productivity) = labor cost per unit of output or the “efficiency wage rate”

30. What are the chief factors determining the size of the mark-up ratio for an industry?

31. In the wage-productivity adjustment mechanism, why might a change in the hourly wage rate cause a change in labor productivity?

32. Explain how the wage-productivity adjustment mechanism approaches and equilibrium.

33. In the wage adjustment mechanism, if wages are cut, why might output prices increase?

34. Why, according to the wage adjustment mechanism, would a profit maximizing firm willingly pay wages higher than those required by a competitive labor market?

Questions 35 - 37 are based on the following.

Evidence from studies comparing employment in adjacent states and counties with different minimum wage rates show that increases in the minimum wage rate have little or no effect on employment. If anything, an increase in minimum wage seems to cause a slight increase in low wage employment. There are at least three ways of explaining this fact:

35. How does the price adjustment mechanism with income changes explain this fact?

36. How does the wage-productivity adjustment mechanism (a use of the efficiency wage framework) explain this fact?

37. How does the distribution of income adjustmentmechanism (another use of the efficiency wage rate framework) explain this fact?

38. Essay: The United States has become a throw-away economy. Rather than pay to repair something, people dispose of it, replace it with something new. Why? Explain the economics behind this tendency.

Answer 1

hello,

Please find the answer below:

Normal Profit: It is the minimum profit needed to stay around in market. When the difference between a firms's total revenue and total cost is zero , this economic condition is called normal profit

external diseconomies: When the extra costs from external economic forces increase with an increase in the industry output,the total costs of a company also increase. This is called external diseconomy. This can be attributed by the increase in the market prices of those factors of production. For example a product needs two inputs A and B , and supply of A suddenly falls which leads to sudden increase of the unit cost.

transaction costs : costs incurred while buying or selling of goods or services. They are incurred during the exchange of goods and services and include a wide range of costs like information costs which are incurred in finding out the price, quality of a good , transportation cost, legal fees, commission and so on

public goods: a good or service given to society by government or private organisation at no profits. Its basically meant for the welfare of the public. Public goods are non excludable goods and are not for any private use. If an individual uses a public good, it is still available for use to the rest of the society.They are available everywhere and for everyone to use

Hope this helps. Thank you!!