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Backward-bending labor supply curve- results because a person is willing and able to work more hours as the wagerate increases until, at some sufficiently high wage, the person chooses to work fewer hours. Brand names- may signalinformation regarding the product, reducing consumer risks; is valuable to a firm; it makes the demand less elastic andcan enable the firm to earn higher profits. Cartel- is an organization of independent firms whose purpose is to controland limit production and maintain or increase prices and profits; cartels are illegal in US. Civil Rights Act of 1964-“unlawful for any employer to discriminate on the basis of race, color, religion, sex, or national origin.” Club good– agood that is excludable but non-rivalrous. Collusion-leads to secret cooperative agreements; illegal in the U.S.; althoughit is legal and acceptable in many other countries. Commons good– a good that is rivalrous but non-excludable.Comparable Worth—the pay ought to be determined by the job characteristics rather than by supply and demand.Compensating wage differentials- wage differences that make up for the higher risk or poorer working conditions ofone job over another. Cost-plus or mark-up pricing- a pricing policy where a firm computes its average costs ofproducing a product and sets the price at some percentage above this cost. Differentiation- means that in theconsumer’s mind, the product is not the same. Marketing is often the key to successful differentiation. Discrimination-When factors unrelated to marginal revenue product affect the wages or jobs that are obtained. It is another reason forwage differentials. Disparate treatment: treating individuals differently because of their race, sex, color, religion, ornational origin. Disparate impact: it is the result of different treatment, not the motivation that matters. Dominantstrategy- strategy that produces better results no matter what strategy other firms follow; oligopoly firms try to achievethis. Economic freedom- the degree to which private individuals are able to carry out voluntary exchange withoutgovernment involvement; linked to standards of living. Economic Rent- when a resource has a perfectly inelasticsupply, its pay or earnings; earnings in excess of transfer earnings. Externality- a cost or benefit of a transaction that isborne by someone who is not directly involved in the transaction. Cost-plus or mark-up pricing- a pricing policywhere a firm computes its average costs of producing a product and sets the price at some percentage above this cost.Free rider- a consumer or producer who enjoys the benefits of a good or service without paying for that good or service.Game theory- provides a description of oligopolistic behavior as a series of strategic moves and countermoves;strategic behavior has been analyzed using game theory mathematical techniques. Labor market supply curve- slopesup because the number of people willing and able to work rises as the wage rate rises and because the number of hoursthat each person is willing and able to work rises as the wage rate rises, at least up to some high wage rate. Marginalfactor cost (MFC)- the additional cost of an additional unit of a resource. Marginal revenue product (MRP)- theadditional revenue that an additional resource can create for a firm. Market failure- occurs when the market outcomeis not the socially or economically efficient outcome, some action by the government is sometimes necessary to ensurethat the market work well. Monopolistic competition- market structure where there are a large number of firms,products produced by the different firms are differentiated, and entry and exit occur easily. Monopsonist is a firm thatis the only buyer of a resource; monopsony firms are able to pay resources less than their MRPs. Nash Equilibrium-occurs when a unilateral move by a participant does not make the participant better off. Negative externality- mayresult when some of the costs of an activity are not borne by consumers or firms not directly involved in the activity.Nonprice Competition- firm attempts to establish its product as a different product from that offered by its rivals.Occupational Segregation- is the separation of jobs by gender. Oligopoly- market structure characterized by: Fewfirms, either standardized or differentiated products, and Difficult entry. Outsourcing- the process of purchasingservices from another firm rather than employing someone to do the service inside the firm; Outsourcing is calledoffshoring when the jobs are purchased from a firm in another country. Personal discrimination- is based uponprejudices on the part of employers, fellow workers, or customers. Positive externality- may result when some of thebenefits of an activity are received by consumers or firms not directly involved in the activity. Price-LeadershipCartels- may form in which firms simply do whatever a single leading firm in the industry does; this avoids strategicbehavior and requires no illegal collusion. Principle of mutual exclusivity- the owner of private property is entitled toenjoy the consumption of that property privately. Principle of rivalry states- when one consumes or uses a good orservice, less remains for others. Private costs and benefits- those that are borne solely by the individuals involved inthe transaction. Private good– good that is both excludable and rivalrous. Private property rights- rights ofindividuals to own property. Product differentiation- implies that the products are different enough that theproducing firms exercise a “mini-monopoly” over their product; reduces the price elasticity of demand, which appearsas a steeper demand curve. Successful product differentiation enables the firm to charge a higher price. Public good–good that is non-excludable and non-rivalrous. Resource Market- market that provides one of the resources forproducing goods and services: labor, capital, land. Social cost- total social cost of a transaction is the private cost plusthe external cost. Statistical discrimination- results when an indicator of group performance is incorrectly applied toan individual member of that group. Strategic behavior- behavior that occurs when what is best for A depends uponwhat B does,


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KSU ECON 22060 - Notes

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