All Flashcards
Differentiate between product and factor markets.
In product markets, households buy goods/services from firms. In factor markets, firms buy factors of production from households.
What are the key differences between perfect competition and monopsony in labor markets?
Perfect competition has many firms and wage-takers; monopsony has one buyer and wage-making power. Monopsony results in lower wages and employment.
Compare the MRC curve in perfect competition vs. monopsony.
In perfect competition, MRC is constant (horizontal). In monopsony, MRC is upward sloping and above the labor supply curve.
Compare the wage and quantity of labor in perfect competition and monopsony.
Perfect competition has higher wage and quantity of labor than monopsony.
What is the impact of a minimum wage on employment?
A minimum wage above the equilibrium wage can decrease employment.
How do occupational licensing laws affect wages?
Occupational licensing laws can increase wages for those who are licensed but may decrease overall employment in the occupation.
What is the effect of government subsidies for education on labor markets?
Subsidies for education can increase the number of qualified workers, increasing labor supply and potentially lowering wages.
Analyze a perfectly competitive labor market graph.
The market wage and quantity are determined by the intersection of market supply and demand for labor. Individual firms face a horizontal MRC curve at the market wage.
Analyze a monopsony labor market graph.
The MRC curve is above the labor supply curve. The monopsonist hires where MRP = MRC, but pays the wage on the labor supply curve at that quantity, resulting in lower wage and employment.
How does a minimum wage above equilibrium affect a perfectly competitive labor market graph?
It creates a surplus of labor (unemployment), shown by the quantity supplied exceeding the quantity demanded at the minimum wage.
What does the firm's demand curve for labor represent in perfect competition?
The firm's demand curve for labor is its MRP curve.