1. Exam 3 12/4 chapters 10-12, 16 35 multiple choice, 1 problem  labor demand example, ch 11 no calculators bring pencil, Oswego ID 12/4 chapters 10-12, 16 35 multiple choice, 1 problem  labor demand example, ch 11 no calculators bring pencil, Oswego ID

2. Final Exam Monday, 12/15, 8-10 a.m. 80 multiple choice bring pencil, Oswego ID cumulative study guide posted this week if taking MAT 102, 120, 210, 220  makeup is Tues., 12/16, 2- 4  makeup ONLY if you have a conflict with MAT Monday, 12/15, 8-10 a.m. 80 multiple choice bring pencil, Oswego ID cumulative study guide posted this week if taking MAT 102, 120, 210, 220  makeup is Tues., 12/16, 2- 4  makeup ONLY if you have a conflict with MAT

3. Exam 3 Review Monopolistic Competition  how does it compare?  choosing P & Q Oligopoly  how does it compare?  interdependence Monopolistic Competition  how does it compare?  choosing P & Q Oligopoly  how does it compare?  interdependence

4. Labor market  labor demand  labor supply Public goods Other (time permitting)  economic rent  collective bargaining Labor market  labor demand  labor supply Public goods Other (time permitting)  economic rent  collective bargaining

5. Monopolistic competition differentiated product  firms’ products are substitutable,  but NOT identical many firms, no collusion zero economic profit in LR marketing means higher costs differentiated product  firms’ products are substitutable,  but NOT identical many firms, no collusion zero economic profit in LR marketing means higher costs

6. downward-sloping demand  MR < P choose Q  where MR = MC choose P  using demand curve downward-sloping demand  MR < P choose Q  where MR = MC choose P  using demand curve

7. P, cost Q (jeans/day) D MR MC 150 $70

8. OligopolyOligopoly few firms  interdependent  barriers to entry differentiated, but substitutable product economic profit possible in LR set of possible behaviors few firms  interdependent  barriers to entry differentiated, but substitutable product economic profit possible in LR set of possible behaviors

9. Interdependence & behavior P, Q decisions of one firm,  affects profits of other firm cartel  firms collude to act like a monopoly price leadership  one firm sets price, others follow P, Q decisions of one firm,  affects profits of other firm cartel  firms collude to act like a monopoly price leadership  one firm sets price, others follow

10. game theory show strategies when outcomes are interdependent be able to interpret game box be able to find Nash equilibrium?  is it best outcome? show strategies when outcomes are interdependent be able to interpret game box be able to find Nash equilibrium?  is it best outcome?

11. Payoff matrix Boeing 4 planes 3 planes Airbus 4 planes 3 planes 32 30 40 36 30 4036 profit, mil $

12. questionsquestions IF Airbus is to earn $40 million profit, how many plane must Boeing produce?  3 planes What is Nash equilibrium?  4 planes each Is there a better outcome?  Yes, 3 planes each IF Airbus is to earn $40 million profit, how many plane must Boeing produce?  3 planes What is Nash equilibrium?  4 planes each Is there a better outcome?  Yes, 3 planes each

13. Labor demand car wash example!  calculate MP, MRP  given wage, how much labor is hired? hire until MRP = MRC  extra revenue of a unit of labor =  extra cost of a unit of labor (wage) car wash example!  calculate MP, MRP  given wage, how much labor is hired? hire until MRP = MRC  extra revenue of a unit of labor =  extra cost of a unit of labor (wage)

14. what increases labor demand? (shifts right) increase in demand for final product  healthcare & nurses increase in labor productivity increase in price of substitute for labor  ATMs vs. bank teller decrease in price of complement to labor  truck and truck driver increase in demand for final product  healthcare & nurses increase in labor productivity increase in price of substitute for labor  ATMs vs. bank teller decrease in price of complement to labor  truck and truck driver

15. increase in technology  computer programmers  but demand for some types of labor will fall increase in technology  computer programmers  but demand for some types of labor will fall

16. Labor supply allocating scarce resource: time substitution effect:  as wage rises, leisure is more expensive  work more, take less leisure allocating scarce resource: time substitution effect:  as wage rises, leisure is more expensive  work more, take less leisure

17. income effect:  as wage rises, income rises  take more leisure since leisure is a normal good  work less income effect:  as wage rises, income rises  take more leisure since leisure is a normal good  work less

18. substitution > income effect  labor supply upward sloping substitution < income effect  labor supply downward sloping substitution > income effect  labor supply upward sloping substitution < income effect  labor supply downward sloping

19. assume substitution > income effect,  UNLESS wages very high backward bending labor supply curve assume substitution > income effect,  UNLESS wages very high backward bending labor supply curve

20. wage Q labor S subst. > inc. effect subst. < inc. effect

21. what increases labor supply? (shifts right) increase adult population increases in preferences for work increase in education/training decrease in nonwage income increase adult population increases in preferences for work increase in education/training decrease in nonwage income

22. Public Goods 2 characteristics:  nonrival, nonexclusive nonrival  can be consumed by one person, without decreasing amount available for others 2 characteristics:  nonrival, nonexclusive nonrival  can be consumed by one person, without decreasing amount available for others

23. nonexclusive  impossible or costly to exclude others from using it, once purchased nonexclusive  impossible or costly to exclude others from using it, once purchased

24. examples:examples: lighthouse flood control dam national defense law enforcement lighthouse flood control dam national defense law enforcement

25. quasi-public good  nonrival, but exclusive open access good  rival, but nonexclusive private good  rival, exclusive examples, page 341 quasi-public good  nonrival, but exclusive open access good  rival, but nonexclusive private good  rival, exclusive examples, page 341

26. provision of public goods public goods are nonexclusive people will not buy them voluntarily  wait for someone else to buy them  free-rider problem market will fail to provide public goods  so government taxes, and then provides public goods public goods are nonexclusive people will not buy them voluntarily  wait for someone else to buy them  free-rider problem market will fail to provide public goods  so government taxes, and then provides public goods

27. Provision of public goods preferences of median voter  determine many outcomes special interest  small groups with big stake -- rent seeking behavior  voters not well-informed -- rational ignorance preferences of median voter  determine many outcomes special interest  small groups with big stake -- rent seeking behavior  voters not well-informed -- rational ignorance

28. special interest legislation  concentrated benefits (to a few)  widespread costs (to many) public goods legislation  widespread benefits  widespread costs special interest legislation  concentrated benefits (to a few)  widespread costs (to many) public goods legislation  widespread benefits  widespread costs

29. Collective bargaining done between labor unions & employers union negotiates wages, benefits, working conditions with employer  contract  agreement applies to all workers done between labor unions & employers union negotiates wages, benefits, working conditions with employer  contract  agreement applies to all workers

30. when disagreements arise mediator  third party tries to help both sides agree binding arbitration  both sides agree to accept a third party compromise strike  not all unions can strike mediator  third party tries to help both sides agree binding arbitration  both sides agree to accept a third party compromise strike  not all unions can strike

31. Economic rent supply & demand of a resource  resource earnings earnings  opp. cost + rent supply & demand of a resource  resource earnings earnings  opp. cost + rent

32. Q res. P res. S D P* Q* upward-sloping supply earnings split rent opp. cost

33. Q res. P res. S D P* Q* inelastic supply earnings mostly rent opp. cost

34. Q res. P res. S D P* Q* elastic supply earnings mostly opp. cost rent opp. cost

35. if supply is perfectly inelastic (vertical)  no other uses for resource  opp. cost is zero  all earnings are rent if supply is perfectly inelastic (vertical)  no other uses for resource  opp. cost is zero  all earnings are rent

36. if supply is perfectly elastic (horizontal)  many other uses for resources  earnings = opp. cost  no rent if supply is perfectly elastic (horizontal)  many other uses for resources  earnings = opp. cost  no rent