Unit Three Study Guide
The upcoming test will include the concepts of supply and demand along with business and labor.
Below is a study guide for the business and labor portion along with an outline of the notes from class and
chapters 7-11 in the book.
Strategies Used by
-why?
Gini Coefficient
Entrepreneurs:
- price-fixing
Lorenz Curve
Small Businesses
Duopoly
Underemployment
-advantages
Monopoly
Productivity = wages
-disadvantages
-what are the
Labor Market
conditions needed?
Discrimination:
Sole Proprietorship
-natural
-Gender- how?
-advantages
monopoly
-Race-how?
-disadvantages
-regulation
-Age
against monopolies
Types of Unions:
Partnership
Key Antitrust
Open Shop
-advantages
Legislation:
Union Shop
-disadvantages
Sherman AntiClosed Shop
Trust Act
“Right to Work”
LLP
Clayton Act
Why is discrimination
-characteristics
Other Business Terms
bad for the economy?
Price Fixing
Corporation
Collusion
How are Government
-advantages
Mergers
Regulation barrier to
-disadvantages
Vertical merger
wages?
-problems with
Horizontal
- Externality
Merger
Minimum Wage ¨What
LLC
Joint Venture
is it? Philosophy?
-advantages
Conglomerate Mergers
Effects?
-disadvantages
What are the Four “P”s
Economist
of Marketing? :
argument for
Purpose of the stock
noprice competition
Argument
market
dumping
against
Dividends
Unions
Stocks
Labor
-effects of unions
Non-Profit
Substitution Effect
-decline of
Corporations
Labor Force
unions
Cooperatives
Wages
- strikes
Market Structures and
Why Do Wages Differ?
-sit-ins
Competition:
Human Capital
-Picketing
Perfect Competition
Barriers to
-collective
-what are the
Wages/Occupations?
Bargaining
conditions needed?
Skilled labor
-management
Monopolistic
Semi-skilled labor
anti-union tactics
Competition
Unskilled labor
Labor Legislation such
-what are the
Professional Labor
as :
conditions needed?
Collective Bargaining
-Wagner Act
Oligopoly
AFL/CIO
-Taft Hartley Act
-what are the
Blue Collar
-Norris
conditions needed?
White Collar
Laguardia act
- collusion
Seniority
Basic Outline of the unit up to sweatshops and inequality
1.
Pure Competition
A. Independent and well-informed buyers and sellers of exactly the same
economic product.
B. Conditions for Pure Competition
1. A large number of buyers and sellers exit
2. Buyers and sellers deal in identical products
3. Each buyer and seller acts independently
4. Buyer and sellers be reasonably well-informed about items for sale.
5. Buyers and sellers are free to enter into, conduct, or get out of business
C. Profit Maximization
D. A Theoretical Situation
1. Imperfect competition
a. All market situations that lack one or more of the conditions of pure
Competition.
2
Monopolistic Competition
A. The market structure that has all the conditions of pure competition except
for identical products
B. Product Differentiation
1. The characteristic that separates monopolistic competition from pure
competition.
C. Nonprice competition
1. Takes the place of price competition
D. Profit Maximization
3.
4.
Oligopoly
A. Interdependent Behavior
1. Collusion
a.
A formal agreement to set prices or to otherwise behave in a cooperative
manner
2.
Price-fixing
a. Agreeing to change the same or similar prices for a product
B.
Pricing Behavior
1.
Price war
a. A series of price cuts by all producers that may lead to unusually low prices
in the industries
2.
Independent Pricing
a. sets it own price based on demand, the cost of inputs, and other factors
3.
Price Leadership
a. takes place when one firm, sometimes the biggest and most powerful in the
industry, takes the lead and initiates most of the pricing changes
C. Profit Maximization
1.
Tend to act conservatively and seldom protest price hikes by their rivals
Monopoly
A. Natural Monopoly
1. A market situation where costs are minimized by having a single firm
produce the product
2. Franchise
a.
government often gives a public utility company permission to act as a
natural monopoly
3.
Economies of sales
a. a situation in which the larger the firm grows, the more efficiently it uses
its personnel, plant, and equipment
B. Geographic Monopoly
1.
No other business in the immediate area offers any competition
C. Technological Monopoly
1.
A firm or individual has discovered a new manufacturing technique or has
invented or created something entirely new
2.
Patent
a. An exclusive right to manufacturing, use, or sell any new and useful
art, machine, manufacture, or composition of matter, or any new and useful
improvement thereof
3.
Copyright
a. gives authors or artists the exclusive right to publish, sell, or reproduce
their work for their lifetime plus 50 years
D. Government Monopoly
1. A business the government owns and operates
E. Profit Maximization
1. Maximize profits the same ways as other forms
a. equate marginal cost with marginal revenue to find the profitmaximizing quantity of output
Market Failures
I. Inadequate Competition
A. Dangers of Monopolies
1. Denies consumers the benefit of competition
2. they may waste and misallocate scarce resources
B. Economic and Political Power
1. inadequate competition may enable a business to influence politics by
wielding its economic might
C. Both Sides of the Market
1. Supply side
a. Oligopoly, we know that the temptation to collude is strong
b. no competition exists at all if a monopolist dominates the supply
side
2. Demand
a. numerous buyers can be found
3. if markets can be kept reasonably competitive, they tend to police
themselves and require less government intervention
I.
Introduction
A. macroeconomics
1. The part of economics that deals with the economy as a whole
B. civilian labor force
1. Civilian men and women form 16 to 65 years old either working or
actively looking for a job
II.
Unions and the Labor Force
A. labor unions are important
1. They have played a significant role in American’s history, and they
were responsible for much of the legislation that affects current pay levels
and working conditions
2. Still have a substantial presence in a number of vital industries
3. Represent nearly 18.6 million workers
III.
Civil War to the 1930s
A. During and after the Civil War, attitudes towards unions began to change
B. Types of Unions
1. Craft or Trade Unions
a. an association of skilled workers who perform the same kind of work
2. industrial union
a. an association of all workers in a given industry, regardless of the job
each person performs
C. Union Activities
1. strike
a. refuse to work until certain demands were met
2. picket
a. parade in front of the employer’s business carrying signs about
the dispute
3. boycott
a. a mass refusal to buy products from targeted employers or
companies
D. Employers Resistance
1. lockout
a. a refusal to let the employees work until management demands
were until management demands were not met
2. company unions
a. unions organized, supported, or run by employers
E. Attitude of the Courts
1. unfavorable attitude toward unions
V. Labor During the Great Depression
A. Unemployed and Wages
1. brought misery to millions
2. 1 in 4 was without a job
B. Pro-Union Legislation
1. federal legislation began to help labor during the depression
VI. Labor Since World War II
A. Antiunion Legislation
1. right-to-work law
a. state law making it illegal to require a worker to join a union
B. AFL-CIO
1. jurisdictional dispute
a. disagreement over which union should perform a certain job
I.
Kinds of Union Arrangement
A. Closed Shops
1. an arrangement in which the employer agrees to hire only union members
B. Union Shops
1. workers do not have to belong to the union to be hired, but they must join
one as soon after and remain a member for as long as they keep their jobs
C. Modified Union Shops
1. workers do not have to belong to a union to be hired and cannot be made to
join one to keep their jobs
2. if workers voluntarily join the union, however, they must remain members
for as long as they hold their jobs
D. Agency Shops
1. workers need to be union members to be hired to keep their Jobs
2. must pay dues to the union
3. non union workers are subject to the contract negotiated by the union
II.
Collective Bargaining
A. a meeting between representatives of both groups
B. grievance procedure
1. a provision for resolving issues that may come up later
C. mediation
1. to process of bringing in a third person or persons to help settle a dispute
D. Arbitration
1. voluntary arbitration
a. both sides agree to place their differences before a third party whose
decision will be accepted as final and binding
2. compulsory arbitration
a. labor and management are forced to turn an unsettled dispute over to a
third party for binding decision
E. fact- finding
1. labor and management agree to have an independent third party investigate
the issues and recommended possible settlements
F. Injunction and Seizure
1. injunction
a. a court order not to act
2. seizure
a. a temporary takeover of operations
G. Presidential influence
1. as a last resort, the president of the US may enter a labor-management
dispute by publicity appealing to both parties to resolve their differences
2. can dire federal workers
I.
Categories of Labor
A. unskilled labor
1. work mainly with their hands
B. semiskilled labor
1. workers with mechanical abilities
C. skilled labor
1. able to operate complex equipment
2. do tasks with little supervision
D. professional labor
1. higher-level skills
II.
Non competing labor Grades
A. Cost of Educating and Training
B. lack of opportunity
C. lack of initiative
III.
Wage determination
A. wage rate
1. a standard amount of pay given for work performed
B. Traditional Theory of Wages
1. traditional theory of wage determination
2. equilibrium wage rate
a. the wage rate that leaves neither a surplus nor a shortage in the labor
market
C. Theory of Negotiated Wages
1. explains wage rates in cases of organized labor and the collective by
bargaining process
2. seniority
a. the length of time a person has been on the job
Regional Wage Differences
A. Labor Mobility
1. the ability and willingness of workers to relocate the markets where
wages are higher
B. Cost of Living
C. Location
IV.
I.
Decline of Union Influence
A. Reasons for Decline
1. many employers made a determined effort to keep union out of their
businesses
2. new additions to the labor force traditionally had little loyalty to organized
labor
3. unions are the victims of their own success
B. Renegotiations Union Wages
1. giveback
a. a wage, fringe benefit, or work rule given up when labor contracts are
renegotiated
2. two –tier wage system
a. a keeps the high wage of current workers, but has much lower wage for
newly hired workers
II
Lower pay for women
A. Gender and Occupation
1. men have tended to gravitate toward higher-paid occupations
2. women’s careers are also interrupted by child bearing
B. Discrimination
1. glass ceiling
a. an invisible barrier that hinders their advancement up the white maledominated corporate ladder
C. comparable worth
1. that people should receive equal pay for work that is different from, but
just as demanding as, other types of work
D. Set-Aside Contracts
1. a guaranteed contract reserved exclusively for a targeted group
III.
The minimum Wage
A. Debate over the minimum wage
1. original intent was to prevent the out right exploitation of workers and to
provide some degree of equity and security to those who lacked the skills
needed to earn a decent income
2. opponents object because of economic freedom
B. Measured In current Dollars
1. dollars that are not adjusted for inflation
C. Adjusted For Inflation
1. real or constant dollars
a. dollars that adjusted in a way the removes the distortion inflations
causes
D. Compared to Manufacturing wages
1. minimum wage will raise again
2. link the minimum wage to inflation, so that the wage will raise when
prices increase