# Problem Set #6 Points Distribution

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Problem Set #6 Points Distribution
Unit 6: Market Failures Problem Set #6 Points Distribution

6 Points FRQ#1

8 Points FRQ#2

11 Points FRQ#3

(a) 1 Point Identifying negative externality because the social cost is higher than the private cost.

(a) 1 Point Identifying negative externality because the social cost is higher than the private cost.

(a) 1 Point Identifying negative externality because the social cost is higher than the private cost.

(a) 1 Point Identifying negative externality because the social cost is higher than the private cost.

(a) 1 Point Identifying negative externality because the social cost is higher than the private cost.

(a) 1 Point Identifying negative externality because the social cost is higher than the private cost.

(a) 1 Point Identifying negative externality because the social cost is higher than the private cost.

(a) 1 Point Identifying negative externality because the social cost is higher than the private cost.

(a) 1 Point Identifying negative externality because the social cost is higher than the private cost.

(a) 1 Point Identifying negative externality because the social cost is higher than the private cost.

(a) 1 Point Identifying negative externality because the social cost is higher than the private cost.

(a) 1 Point Identifying negative externality because the social cost is higher than the private cost.

(a) 1 Point Identifying negative externality because the social cost is higher than the private cost.

(a) 1 Point Identifying negative externality because the social cost is higher than the private cost.

Real World Application of Key Concepts
Question #1 Real World Application of Key Concepts 5 Points EACH 2 Points Definition 3 Points Clear Example

2 Points: Some confusion/Unclear 1 Point: Major confusion
1. Derived Demand Definition (2 points): Demand for resources is derived by the demand for the product in which they make. If demand for product goes up, the demand for the resource goes up and vice versa. Example 3 Points: Clear example If demand for surfboards increases, the demand for shapers (the resource used to make surfboards) also increases. 2 Points: Some confusion/Unclear The demand for surfboards changes the demand for shapers 1 Point: Major confusion If the demand for shapers up, the demand for surfboards goes up.

2. MRP and MRC Definition (2 points): MRP is the additional revenue generated by an additional resource. It is the marginal product of the worker times the price of the products they make MRC is the additional cost of hiring an additional resource. MRC equals the wage in perfect competition. Example: (Must show BOTH) 3 Points: Clear example 2 Points: Some confusion 1 Point: Major confusion

3. Monopsony Definition (2 points): A monopoly for labor. An imperfectly competitive labor market that is characterized by one firm that does all the hiring. The firm is a wage maker. Example: 3 Points: Clear example 2 Points: Some confusion 1 Point: Major confusion

How Wages are Determined in a Competitive Labor Markets
12 Points Question #3 How Wages are Determined in a Competitive Labor Markets There are 16 questions, but only 12 will be worth points. Grade only the answers in BLUE.

1 point for each answer (Must be full sentence)
1. Two factors that affect demand for labor? MRP (additional revenue generated) Productivity of the worker Price of related resources (subs and comp) 2. How does MRP affect demand for labor? MRP equals the demand for labor. The MRP of a worker reveals how much they are worth to the firm. The greater the MRP the greater the demand. 3. Why is demand curve downward sloping? Each worker is less productive and is worth less than the previous worker due to dim. marginal returns. As wage falls, the quantity that of workers that firms will hire will increase. 4. What determines supply of labor? Quantity of qualified workers/Government licensing Societal attitude toward leisure and work

1 point for each answer (Must be full sentence)
5.Why is supply upward sloping? To increase the amount of workers that are willing to work, the wage must increase. Each worker values leisure activities more than the previous worker. 6. \$3.00 (1/2 point) workers (1/2 point) workers supplied workers demanded workers laid off workers enter 12. Fewer workers would lose their job 13. Unskilled will lose their jobs

1 point for each answer (Must be full sentence)
14. Who benefits? Workers who don’t get fired and are now get a higher wage 15. Who is hurt by minimum wage? Workers that are fired because the quantity demand by firms fall due to the increase in wage Firms that must pay higher labor costs 16. Do you favor higher minimum wage? Why? Full points if their opinion is supported by an clear explanation.

8 Points FRQ#1

This FRQ has parts from units 3, 4, and 5.
13 Points FRQ#2 This FRQ has parts from units 3, 4, and 5.

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