 6.00 Understand economics trends and communication.
 6.01 Analyze cost/profit relationships to guide business decision-making.
Specialization of labor:
 __________________________________________________________
 The person becomes an expert and very efficient at doing the work
 Specialization by trade or profession
 ________________________________________________________________________
Division of labor:
 ___________________________________________________________________
 Definitions
Depth of jobs:
 Defined as the amount of control you have over the tasks that you do
 _______________________________: There are strict guidelines you must follow, and you make very few decisions.
 High depth: You follow ___________________________________________________________________.
Scope of jobs:
 ______________________________________________ operations you do on the job and the frequency with which you do them
 The lower your task level, the lower the scope of the job
 Low scope: The job is to put ___________________________________________________.
 ___________________: The job is to put doors on cars, put seats in cars, and check the steering mechanism.
 Specialization
Describe how resources are involved in specialization.
 Natural resources: We locate businesses where they can be the most successful (e.g., ski lodge in the mountains close to the
slopes, orange groves in states with warm climates.
 _______________________________________________________________________(e.g., use of robots on assembly lines).
 ___________________________________: This occurs when people use their different skills and abilities in jobs for which they
are best suited. People should do what they do best so that the most goods and services can be produced.
 __________________________________________
Identify forms of specialization of human resources.
 Describe specialization by trade or profession.
 This is the type of work you perform to earn a living (e.g., ______________________________________________ etc.).
 Describe specialization by stage of production.
 This form occurs when more than one state of production is needed to change a raw material into a finished product. The
process of making the best use of labor resources in the production of goods and services
 One person assembles the parts of a car door another person attaches it to the car frame, another checks it for
proper movement
 __________________________________________________________________________
 Describe specialization by task.
 ______________________________________________ so specialized by a worker does only one small part of the total
job (e.g., in a textile mill, one worker cleans wool, another spins it into yarn, another dyes the yarn, and another weaves it
into a woolen fabric).
 Specialization
Explain the relationship between the depth and scope of a job.
 The depth of the job measure a worker’s control over how a job is done
 ________________________________________________________________ or service the worker is responsible for performing
Describe the advantages of specialization.
 Simplified worker training
 ________________________________________________
 Increased quality of work
 _______________________________________________
Increased level of skill
Increased production rates
Ease of transferring to a similar job
Explain the disadvantages of specialization.
 Increased interdependency
Specialization
 ___________________________________ _______________
Decreased pride in work
 Decreased morale and enthusiasm for the job
 Increased chance of obsolescence because of technological advances
 ____________________________________________________ cause difficulty transferring or obtaining another job
Describe ways to overcome the disadvantages of specialization
 ________________________________________: Management may combine job tasks to restore wholeness (e.g., instead of
limiting salespeople strictly to selling merchandise, their jobs may be enlarged to help _____________________, restocking
merchandise, etc.).
 Job rotation: Managers may also rotate employees periodically so that they learn new job tasks and see how their old tasks relate
to the new tasks.
 ______________________________ Managers add interest to a task to increase a job’s depth, allowing workers to make more
decision, set their own pace, and supervise others.
 Job satisfaction: Managers may ask for and use employee suggestions; allow flexible or alternative work schedules; praise work
well done; and provide cash incentives, contests, and bonuses.
 ________________________: Group of employees (can be in different companies) that do much the same kind of work or are in
the same industry that often participate in collective bargaining. A labor union is an organization of wage earners or salary
workers established for the purpose of protecting their collective interests when dealing with employers.
 Local: The union in that particular company or area
 National: The headquarters of the whole union
 Labor Vocabulary
 ____________________: A group of unions or labor organizations that are in some way coordinated or connected. Adds more
power to the union because other unions will support an “action.”
 Collective bargaining: consists of negotiations between an employer and a group of employees so as to determine the conditions
of employment. The result of collective bargaining procedures is a collective agreement. Employees are often represented in
bargaining by a union or other labor organization.
 Labor Vocabulary
 Strikes: A work stoppage on the part of the union
 Picketing: Method employed to raise awareness of the cause, protesters usually carry signs
 ___________________________________________________________________________
 Featherbedding: Adding workers that aren’t needed to protect jobs (coal man on a diesel train)
 Lockouts: Company action to stop workers from coming to work
 _________________________________ Legal action to stop an action on the part of the company or the union
 Strikebreakers: _____________________________________________________________________________
 Labor Unions
 Identify reasons that labor unions form.
 A means of collectively bargaining with employers for fair wages and decent working conditions
 Workers feel unfairly treated by management or the owners
 Identify types of labor issues.
 ___________________________ (working conditions, hours, training, unsafe materials or equipment)
 ____________________________ (company is making lots of money but pays poor wages)
 Classify types of unions.
 Craft – skilled laborers (carpenters, electricians, etc)
 ______________________________ workers in the same industry regardless of skill
 Labor Unions
 Describe levels of union organization.
 National – headquarters of all the locals
 State – headquarters for the locals within a single state
 Local – Regional (think city or part of a city, county)
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 IN-PLANT LOCAL
 a union local restricting membership to one specific workplace, working for one particular employer
 CITY-WIDE LOCAL
 a union local whose jurisdiction is the named city
 COUNTY-WIDE LOCAL
 a union local whose jurisdiction is the named county
 STATE-WIDE LOCAL
 a union local whose jurisdiction is the named state
 PROVINCE-WIDE LOCAL
 a union local whose jurisdiction is the named province
 REGIONAL-LOCAL
 a union local whose jurisdiction is the named region
 Shop (plant, firm, company)
 Members (rank and file)
Labor Unions
Describe types of union organization.
 _______________________________
 all employees are supplied by the labor union exclusively, typically through the hiring hall, and are required to
maintain union membership in order to maintain employment
 UNION SHOP
 any employee can be procured from any source and once hired, the employee is required to maintain union
membership in order to maintain employment
 ________________________________________
 any employee may or may not belong to the union organization, yet all employees are required to pay dues and
other fees for the package of services supplied by union organization
 OPEN SHOP
 any employee voluntarily belong to the union and may voluntarily pay dues and other fees to the union
organization
Labor Unions
Describe the collective bargaining process.
 The company management team negotiates with union representatives and then puts the agreed upon contract proposal
before the membership for ratification
 If ratified, the contract becomes the new work rules, pay and benefits for the selected time
 Collective bargaining is governed by federal and state statutory laws, administrative agency regulations, and judicial
decisions. In areas where federal and state law overlap, state laws are preempted.
Explain types of union negotiation strategies.
 ______________________________________________________________________________________________
Labor Unions
Describe types of management negotiation strategies.
 Tying concessions to important give-backs, lockouts, hiring strike breakers, injunctions
Explain the effects of unionism on workers.
 _________________________________ and agree to let the company and union negotiate terms of employment and
pay
 A level of protection from poor managers
Describe the effects of unionism on businesses.
 Can negotiate with a few people rather than each employee
 Costs tend to rise, but so can productivity
 Economists who study unions—including some who are avowedly pro-union—analyze them as CARTELS that raise wages
above competitive levels by restricting the SUPPLY of labor to various firms and industries.
Stages of production:
 Primary production involves the extraction of raw materials (e.g. coal, iron, agricultural commodities). Raw materials can be:
 _____________________________________________________________________________________________
 Harvested / collected – e.g. fish
 Grown – e.g. timber, cereal crops
 Secondary production involves transforming raw materials into goods. There are two main kinds of goods:
 __________________________ – e.g. washing machines, DVD players. As the name implies, these are used by consumers
 Industrial / capital goods – e.g. plant and machinery, complex information systems. Industrial and capital goods are used
by businesses themselves during the production process
 ________________________________ is associated with the provision of services (an intangible product). Firefighters, taxis
drivers, lawyers, bankers.
 Definitions
 Theory of production: an effort to explain the principles by which a business firm decides how much of each commodity that it
sells (its “outputs” or “products”) it will produce, and how much of each kind of labour, raw material, fixed capital good, etc., that
it employs (its “inputs” or “factors of production”) it will use.
 ____________________________________: The production function relates the output of a firm to the amount of inputs,
typically capital and labor. Keep in mind that the production function describes technology, not economic behavior.
 Definitions
 Increasing returns: Adding resources or workers will result in an increasing ratio of product (marginal return)
 __________________________________: Adding resources or workers will result in an decreasing ratio of product (marginal
return)
 _________________________________: When increasing amounts of one factor of production are employed in production along
with a fixed amount of some other production factor, after ____________________________________________________ of
product become smaller and smaller. (Tomato/fertilizer example)
 Definitions
 Law of variable proportions: states that as the quantity of one factor is increased, keeping the other factors fixed, the marginal
product of that factor will eventually decline.
 Marginal product negative returns: _______________________________________________ adding more of one factor of
production, while holding all others constant, will at some point yield lower per-unit returns
 Definitions
 Marginal cost: _________________________________________________________ cost of the additional inputs needed to
produce that output.
 Total revenue: The revenue received by a firm for the sale of its output. Total revenue is one two bits of information a firm needs
to calculate economic profit, the other is total cost. In general, total revenue is the price times quantity--the price received for
selling a good times the quantity of the good sold at that price.
 Marginal revenue: The change in total revenue resulting from a change in the quantity of output sold. Marginal revenue indicates
how much extra revenue a firm receives for selling an extra unit of output.
____________________________________________________________________________________________________
 Production
 Explain the stages of production.
 In Stage I, _________________________________ is positive and increasing. In Stage II, marginal product is positive, but
decreasing. And in Stage III, marginal product is negative.
 Stage I - companies will see increased ______________________________, or output, with each addition of a non-fixed
variable. For example, if the fixed variable is property, a non-fixed variable might be the addition of new employees.
 Stage II - ___________________________________________ strive for. Here, a business will be able to optimize its
output. Economists say this is stage in which "rational" firms should operate.
 The last stage of production is where the economic phenomenon referred to as "the law of diminishing returns" appears.
 Production
 Describe the impact of the law of diminishing returns on production decisions.
 _____________________________________________________________________________________
 Explain how total revenue and marginal revenue are used to determine the amount of output that will generate the most profit.
 ____________________________________ is all the income generated by selling the products the company makes
 Marginal revenue is how much money an additional item will produce after it is sold.
 Marginal revenue helps the company calculate whether to make a few more items
 Marginal revenue is the extra revenue generated when a firm sells one more unit of output. It plays a key role in
the _______________________________________ decision of a firm relative to marginal cost.
 total revenue and marginal revenue
 The __________________________________________ received by a firm is the change in total revenue divided by the change in
quantity, often expressed as this simple equation:
marginal revenue = change in total revenue
change quantity