Chapter nineteen: Earnings and Discrimination
Margin note 1. Page 398.
"Doesn't seem to take every nonmonetary aspect of a job into consideration."
The theory of compensating differential is the difference in wages that arises to offset the nonmonetary characteristics of different jobs. Although I can think of think of some industries/jobs where this doesn't seem to come into play. My family owns among other things a chain of convenience stores in Texas. Four of these stores have QSRs (quick service restaurants). I have spent time learning the ins and outs of those stores, as well as training managers for them. So far in my experience the fast-food environment has been the most grueling to work in. It can be hard work. However, it requires no education background. People who have never finished high school can learn how to drop a basket of french fries. So in this industry, pay seems to be based on amount of education - not the amount/difficulty of labor.
On the other end of the spectrum, there are people in the entertainment business - I'll focus on the movie industry. Whereas shooting a movie may be physically taxing for a few months, actors get paid a ridiculous amount of money. Their job is not particularly dangerous (the ones who don't do their own stunts) and some have gone to theater shcoool - some haven't. The people in this industry aren't saving lives or producing an essential need for humans, it is simply entertainment. Yet it can be one of the richest industries in the United States.
Margin note 2. Page 399.
"Human capital view: People with a higher education make more money."
Human capital is the accumulation of investments in people, such as education and on-the-job training. The text states that those with a college degree earn almost twice as much those without a college degree. Depending on the type of job you are looking for, education and experience can make all the difference. I know at the job I am at now, I was called for interview because I had previous experience at a business in the same industry. When hiring, employers look for the right fit for the job, and education, previous training, and/or experience can signal that.
Margin note 3. Page 402.
"Signaling theory of education: a degree is almost a facade of ability, and does not enhance productivity."
Under the signaling theory of education, workers are not more productive because they have higher learning, it just seems like they are. Where I do think that there is a morsel of truth in that, I don't believe it to be entirely true. I do think that real-life experience can do more than any college classroom, but there are things an individual can learn from obtaining a degree. The most important of which is broadening your perspective. Earning a degree can also show that you are committed to that field.
Thursday, May 2, 2013
Chapter 18 Reflection
Chapter eighteen: The Markets for the Factors of Production
1. What is the concept of diminishing marginal product? Draw a basic graph showing a production function curve. What happens to the curve as the quantity of input increases?
2. Name one reason that can cause the labor-demand curve to shift. Describe what would happen to the curve in your example (which way it would shift).
3. Describe what would happen to equilibrium wage and labor supply in a country that has seen a recent influx of immigrants? What would happen to the equilibrium wage and labor supply of the country the workers immigrated from?
1. What is the concept of diminishing marginal product? Draw a basic graph showing a production function curve. What happens to the curve as the quantity of input increases?
2. Name one reason that can cause the labor-demand curve to shift. Describe what would happen to the curve in your example (which way it would shift).
3. Describe what would happen to equilibrium wage and labor supply in a country that has seen a recent influx of immigrants? What would happen to the equilibrium wage and labor supply of the country the workers immigrated from?
Chapter 17 Reflection
Chapter seventeen: Oligopoly
One of the prominent concepts we've learned so far throughout this course is that competition is healthy for the economy. The Sherman Antitrust Act of 1890 was passed to prevent price-fixing which can enable firms within an oligopoly market to form a cartel and act as a monopoly.
The market of wireless providers could definitely be considered an oligopoly. An oligopoly is characterized by a few number of firms offering identical or similar products. Right now there are four top wireless providers: Verizon, AT&T, Sprint Nextel, and T-Mobile who dominate a majority of the market. Obviously these companies have not formed a cartel, primarily because it is against the law. But another reason I think is just as significant is the fact that they are also competing with self-interest in mind. Each have different offers and utilize various forms of bundling, while trying to offer the best deal while making the most profit.
If AT&T would have been allowed to merge with T-Mobile, the number of governing providers would have dropped down to three, pushing the industry ever closer to monopolostic status. Personally, I like having options when choosing who to patronize when it comes to a wireless provider. I hold in high regard the ability to have a choice; to weigh the pros and cons of a business especially when I'm going to sign a contract with them.
This being said I do support antitrust laws and goverment intervention in preventing monopolistic behavior in firms. But I think it's a tough battle. The driving force behind business is success, profit, and being number one in the industry in which you are competiting. Big companies often do this by acquiring their competition, reassuring their leadership status in the market. But "Big Business" does need to be kept in check to assure that consumers have choices and aren't forced to pay outrageous prices.
Nothing about chapter seventeen was very unclear, but I found the chapter interesting - in particular game theory and the prisoners' dilemma. With the visual of the decision box, it is interesting to see how two competitors choices affect both them and their competition. If one acts out of self-interest and the other does not, then the selfish firm comes out on top. If they both act out of self-interest, they are both at a mediocre standpoint, but if they both cooperate the result is most profitable for both.
That's all for now....
Ciao!
One of the prominent concepts we've learned so far throughout this course is that competition is healthy for the economy. The Sherman Antitrust Act of 1890 was passed to prevent price-fixing which can enable firms within an oligopoly market to form a cartel and act as a monopoly.
The market of wireless providers could definitely be considered an oligopoly. An oligopoly is characterized by a few number of firms offering identical or similar products. Right now there are four top wireless providers: Verizon, AT&T, Sprint Nextel, and T-Mobile who dominate a majority of the market. Obviously these companies have not formed a cartel, primarily because it is against the law. But another reason I think is just as significant is the fact that they are also competing with self-interest in mind. Each have different offers and utilize various forms of bundling, while trying to offer the best deal while making the most profit.
If AT&T would have been allowed to merge with T-Mobile, the number of governing providers would have dropped down to three, pushing the industry ever closer to monopolostic status. Personally, I like having options when choosing who to patronize when it comes to a wireless provider. I hold in high regard the ability to have a choice; to weigh the pros and cons of a business especially when I'm going to sign a contract with them.
This being said I do support antitrust laws and goverment intervention in preventing monopolistic behavior in firms. But I think it's a tough battle. The driving force behind business is success, profit, and being number one in the industry in which you are competiting. Big companies often do this by acquiring their competition, reassuring their leadership status in the market. But "Big Business" does need to be kept in check to assure that consumers have choices and aren't forced to pay outrageous prices.
Nothing about chapter seventeen was very unclear, but I found the chapter interesting - in particular game theory and the prisoners' dilemma. With the visual of the decision box, it is interesting to see how two competitors choices affect both them and their competition. If one acts out of self-interest and the other does not, then the selfish firm comes out on top. If they both act out of self-interest, they are both at a mediocre standpoint, but if they both cooperate the result is most profitable for both.
That's all for now....
Ciao!
Wednesday, May 1, 2013
Chapter 16 Reflection
Chapter sixteen: Monopolistic Competition
Monopolistic competition is when there are many firms in the market that sell similar but not identical products. Some attributes of monopolistic competition are: many sellers, product differentiation, and free entry and exit into and out of the market.
An oligopoly is a market structure where there are few firms selling similar or identical products. Both firms are a form of imperfect competition.
Advertising can be vital to both monopolistic competition and oligopoly firms. These firms often use advertising to develop brand names and create consumer loyalty. In our text it states that there is a bit of a fiery disagreement between economists over the role advertising plays and the intentions behind these firms when they utilize it.
The critics state that firms use advertising to influence customers' preferences and inhibit competition. The defenders say that advertising is used to inform customers and compete on price and product quality.
I have to say I think I'm stuck in the middle. While I do see some firms using advertising for informational purposes, I also do think it is to thwart compeition by creating such a saturation for a product in a consumer's mind that it is the only one they think of and perceive it to be superior. There really is no informational reason for firms to pay for product placement in movies and on TV shows, and some label it as subliminal messaging. How many subtle messages have you seen-maybe without even realizing it?
ET loves Reeses Pieces.
Little Nicky thinks Popeye's Chicken is [expletive] awesome!
Rene Russo shotguns a Pepsi like there's no tomorrow.
When you come back from the future, Western Union may have a package for you.
And I am beginning to think I could jot on down to the local GM dealer and buy a car that transforms into a cool robot.
Got a zit? Put some Windex on it.
I don't know that any of these advertisements are informational (maybe the one for Popeye's Chicken, haha) but they sure are ingeniously building brand loyalty.
When advertising is successful, firms will attract consumers. The consumer may turn into a loyal customer, and keep returning to buy the firm's products. Therefore I would think that successful use of advertising can definitely give a firm an edge, and maybe even allow the firm to act as a monopoly in the short-run.
The most interesting thing to me in this chapter was the relation of the supply and demand curves of monopolistic competition. I thought it was interesting how in the short-run, a monopolistically competitive firm will choose its quantity and price the same way a monopoly does - by producing at a point where MR=MC. That being said, when a company is doing well, it is an incentive for others to enter the market. When another firm enters the market it would decrease demand for present firms, shiftint the curve to the left. In the long-run this could cause a firm's equilibrium to be at a point where P=ATC, and they would not have any profit.
That's all for now...
Ciao!
Monopolistic competition is when there are many firms in the market that sell similar but not identical products. Some attributes of monopolistic competition are: many sellers, product differentiation, and free entry and exit into and out of the market.
An oligopoly is a market structure where there are few firms selling similar or identical products. Both firms are a form of imperfect competition.
Advertising can be vital to both monopolistic competition and oligopoly firms. These firms often use advertising to develop brand names and create consumer loyalty. In our text it states that there is a bit of a fiery disagreement between economists over the role advertising plays and the intentions behind these firms when they utilize it.
The critics state that firms use advertising to influence customers' preferences and inhibit competition. The defenders say that advertising is used to inform customers and compete on price and product quality.
I have to say I think I'm stuck in the middle. While I do see some firms using advertising for informational purposes, I also do think it is to thwart compeition by creating such a saturation for a product in a consumer's mind that it is the only one they think of and perceive it to be superior. There really is no informational reason for firms to pay for product placement in movies and on TV shows, and some label it as subliminal messaging. How many subtle messages have you seen-maybe without even realizing it?
ET loves Reeses Pieces.
Little Nicky thinks Popeye's Chicken is [expletive] awesome!
Rene Russo shotguns a Pepsi like there's no tomorrow.
When you come back from the future, Western Union may have a package for you.
And I am beginning to think I could jot on down to the local GM dealer and buy a car that transforms into a cool robot.
Got a zit? Put some Windex on it.
I don't know that any of these advertisements are informational (maybe the one for Popeye's Chicken, haha) but they sure are ingeniously building brand loyalty.
When advertising is successful, firms will attract consumers. The consumer may turn into a loyal customer, and keep returning to buy the firm's products. Therefore I would think that successful use of advertising can definitely give a firm an edge, and maybe even allow the firm to act as a monopoly in the short-run.
The most interesting thing to me in this chapter was the relation of the supply and demand curves of monopolistic competition. I thought it was interesting how in the short-run, a monopolistically competitive firm will choose its quantity and price the same way a monopoly does - by producing at a point where MR=MC. That being said, when a company is doing well, it is an incentive for others to enter the market. When another firm enters the market it would decrease demand for present firms, shiftint the curve to the left. In the long-run this could cause a firm's equilibrium to be at a point where P=ATC, and they would not have any profit.
Ciao!
Sunday, April 28, 2013
Chapter 15 Reflection
Chapter fifteen: Monopoly
The thing that I found most interesting and learned from this chapter is that when graphing curves for monopolies, there is no supply curve. After reading this though, it makes perfect sense. Because a monopoly is the sole provider of a good, it is a price-maker. And there is no supply relation between price and the quanity of output produced. A monopoly will maximize profit by producing the quanitity at which MR=MC, but then it will choose the price at which that quantity is demanded. And whereas a competitive firm will choose a point at where P=MR, a monopolistic firm's price will exceed its marginal revenue.
In the text it states that goverment-created monopolies usually arise due to 1) political clout or 2) because the goverment believes it would be in the best interest of the public. I am not sure that either of these would be a good reason to create a monopoly on trash removal. I think the reason for goverment to create this monopoly would be to generate income.
We were able to choose between two private companies, and chose who we thought had the best prices, offerings (such as recycling pickup) and schedule. I personally favor being able to choose. I guess I'm just conservative like that. :)
That's all for now...
Ciao!
The thing that I found most interesting and learned from this chapter is that when graphing curves for monopolies, there is no supply curve. After reading this though, it makes perfect sense. Because a monopoly is the sole provider of a good, it is a price-maker. And there is no supply relation between price and the quanity of output produced. A monopoly will maximize profit by producing the quanitity at which MR=MC, but then it will choose the price at which that quantity is demanded. And whereas a competitive firm will choose a point at where P=MR, a monopolistic firm's price will exceed its marginal revenue.
In the text it states that goverment-created monopolies usually arise due to 1) political clout or 2) because the goverment believes it would be in the best interest of the public. I am not sure that either of these would be a good reason to create a monopoly on trash removal. I think the reason for goverment to create this monopoly would be to generate income.
We were able to choose between two private companies, and chose who we thought had the best prices, offerings (such as recycling pickup) and schedule. I personally favor being able to choose. I guess I'm just conservative like that. :)
That's all for now...
Ciao!
Chapter 14 Reflection
Chapter fourteen: Firms in Competitive Markets
The goal of a firm in a perfectly competitive market is to maximize profit. If a firm is profit-maximizing, it will operate at a point where price equals marginal cost (P=MC). This is because in a perfectly competitive market, firms are price-takers. Therefore they really can't set their prices higher than the point where P=MC or they are likely to have no business.
At the point of profit-maximization, price also equals marginal revenue (P=MR). And marginal revenue equals marginal cost (MR=MC), hence the two are interchangeable in relation to price under these circumstances. Because a firm in a perfectly competitive market tries to operate at the point where MR=MC, it is understandable that if MR is greater than MC, the firm can increase production and it will result in an increase in profit.
From what I have read, there seems to be no actual perfectly competitive firm. I suppose what I think would come close is something like the corn industry. This is because there are a large number of buyers and sellers, the goods being offered are identical, and I don't think there are any barriers to entry or exit of the market.
I guess it doesn't suprise me that there are no firms considered to be perfectly competitive. It seems like it would be near impossible to operate under these conditions 100% of the time!
That's all for now...
Ciao!
The goal of a firm in a perfectly competitive market is to maximize profit. If a firm is profit-maximizing, it will operate at a point where price equals marginal cost (P=MC). This is because in a perfectly competitive market, firms are price-takers. Therefore they really can't set their prices higher than the point where P=MC or they are likely to have no business.
At the point of profit-maximization, price also equals marginal revenue (P=MR). And marginal revenue equals marginal cost (MR=MC), hence the two are interchangeable in relation to price under these circumstances. Because a firm in a perfectly competitive market tries to operate at the point where MR=MC, it is understandable that if MR is greater than MC, the firm can increase production and it will result in an increase in profit.
From what I have read, there seems to be no actual perfectly competitive firm. I suppose what I think would come close is something like the corn industry. This is because there are a large number of buyers and sellers, the goods being offered are identical, and I don't think there are any barriers to entry or exit of the market.
I guess it doesn't suprise me that there are no firms considered to be perfectly competitive. It seems like it would be near impossible to operate under these conditions 100% of the time!
That's all for now...
Ciao!
Thursday, April 4, 2013
Chaper 13 Reflections
Chapter thirteen: The Costs of Production
Marginal costs curves first start to fall before they rise. This is due to the fact that while at first an increase in marginal product may see a decrease in marginal cost, eventually a firm will experience diminishing marginal product which happens when marginal cost rises with each marginal product.
Simply put: when there's too many cooks in the kitchen it starts to be more expensive to bake an additional cake.
Depending on the size of the company, with the first few hires it may reduce marginal cost while increasing marginal product because a team may be more efficient than just one worker. Eventually the company will see diminishing marginal product for reasons such as the workspace getting increasingly crowded, having to hire more management to oversee the increasing amount of employees, etc.
Marginal cost is important when deciding to increase of decrease production because profit-maximizing firms strive to operate at a point where marginal revenue equals marginal cost. If marginal revenue is less than marginal cost, a firm can boost profit by increasing production - and vice versa.
There are many ways I could apply these cost concepts to my life. The first that comes to mind would be finding the point of benefit maximization between work and school. There are x amount of hours I need to work to be able to eat, pay bills, support my kids (dogs), etc. Over the past couple of semesters I have had to find the balance of classes to be able to utilitze my time as efficiently as possible while not overwhelming myself and being able to achieve the high standards I've set for myself in terms of grades and GPA. The first semester I only took two classes. I can now relate that to having marginal revenue greater than marginal cost. I realized that if I was diligent, I could squeeze another class in. Now if I were to take four classes, I think that would equate to marginal cost being higher than marginal revenue. My grades would likely suffer at the hand of just not having enough time to fulfill all of the homework assignments and study like I should. It seems that for now, I have found the point - at three classes - where my marginal "revenue" equals my marginal cost. I have found the current point where I can make enough to provide a living, earn the grades I want, and get done with my degree as quickly and efficiently as possible.
And that's all for now...
Ciao!
Marginal costs curves first start to fall before they rise. This is due to the fact that while at first an increase in marginal product may see a decrease in marginal cost, eventually a firm will experience diminishing marginal product which happens when marginal cost rises with each marginal product.
Simply put: when there's too many cooks in the kitchen it starts to be more expensive to bake an additional cake.
Depending on the size of the company, with the first few hires it may reduce marginal cost while increasing marginal product because a team may be more efficient than just one worker. Eventually the company will see diminishing marginal product for reasons such as the workspace getting increasingly crowded, having to hire more management to oversee the increasing amount of employees, etc.
Marginal cost is important when deciding to increase of decrease production because profit-maximizing firms strive to operate at a point where marginal revenue equals marginal cost. If marginal revenue is less than marginal cost, a firm can boost profit by increasing production - and vice versa.
There are many ways I could apply these cost concepts to my life. The first that comes to mind would be finding the point of benefit maximization between work and school. There are x amount of hours I need to work to be able to eat, pay bills, support my kids (dogs), etc. Over the past couple of semesters I have had to find the balance of classes to be able to utilitze my time as efficiently as possible while not overwhelming myself and being able to achieve the high standards I've set for myself in terms of grades and GPA. The first semester I only took two classes. I can now relate that to having marginal revenue greater than marginal cost. I realized that if I was diligent, I could squeeze another class in. Now if I were to take four classes, I think that would equate to marginal cost being higher than marginal revenue. My grades would likely suffer at the hand of just not having enough time to fulfill all of the homework assignments and study like I should. It seems that for now, I have found the point - at three classes - where my marginal "revenue" equals my marginal cost. I have found the current point where I can make enough to provide a living, earn the grades I want, and get done with my degree as quickly and efficiently as possible.
And that's all for now...
Ciao!
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