ECON 151 Lecture Notes - Lecture 23: Human Capital, Marginal Utility, Opportunity Cost

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greyrabbit304

22 Nov 2020

School

Santa Clara University

Department

Economics

Course

ECON 151

Professor

Bouguen

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Document Summary

Employer gonna pay everyone at the average (w* = 2-p) between high and low productivity workers b/c they don"t know who is what type of worker. E(wx) = p x w1 + (1 - p) w2. = p + 1 - uhh = 1-p. Wages set at different levels at workers can discriminate on productivity. Signals allow workers to differentiate between high and low productivity. Worker 1 goes for e=0 with w1 = 1 and p=1-0=0. Worker 2 goes for e=e*, with p = 2 e /2. For worker 2, signaling is costly: she gets less. W1 and w2 are lower (or equal) with signaling (compared to perfect info) . : no social than in the perfect info case. gain from signaling. W1 making less than before (so hurt by signaling) But the sum of the two gains = no gains. Signaling just make the society more fair i. e. higher productivity workers get higher wages.

Related Questions

1. âTotal compensationâ includes:

a. Wages and salaries and all fringe benefits

b. Wages and salaries and public (legally mandated) fringe benefits only

c. Wages and salaries and private (nonmandatory) fringe benefits only

d. Wages and salaries and all fringe benefits net of all personal taxes

2. Fringe benefits currently account for approximately what percentage of total compensation?

a. 5% â 10%

c. 25% â 30%

b. 15% â 20%

d. 35% â 40%

3. As a percentage of benefits, the largest share goes to:

a. retirement and savings

c. paid leave

b. insurance

d. legally required benefits

4. The proportion of total compensation paid out as fringe benefits tends to be larger in:

a. high-paid industries compared to low-paid industries

b. service industries compared to manufacturing industries

c. white-collar occupations compared to blue-collar occupations

d. retail trade compared to transportation and public utilities

5. The share of fringe benefits in total employee compensation:

a. grew steadily in the 1960s and 1970s but has fallen since 1980

b. was unchanged in the 1960s and 1970s and has fallen since 1980

c. shrank in the 1960s and 1970s and has remained constant since then

d. grew steadily from 1960 through the mid-1990s

6. Which one of the following is not a valid explanation for why workers may prefer an extra dollarâs worth of fringe benefits to an extra dollarâs worth of cash?

a. workers may prefer to bind themselves against their own tendencies toward immediate gratification

b. certain fringe benefits effectively trade current taxes for future taxes

c. people generally prefer in-kind benefits to cash

d. certain fringe benefits are untaxed

7. Because there is a _______ marginal rate of substitution of fringe benefits for wages, a workerâs wage-fringe indifference curves are typically _______:

a. diminishing; convex to the origin

b. constant; straight lines

c. diminishing; concave to the origin

d. negative; straight lines

8. The slope of a wage-fringe indifference curve reflects:

a. the overall utility level of a person

b. a workerâs willingness to give up an extra dollar of wages in exchange for an extra dollar of fringe benefits

c. the firmâs cost of paying an extra dollar of compensation as wages rather than fringe benefits

d. an increasing marginal rate of substitution of fringe benefits for cash 2

9. An individual wage-fringe isoprofit line shows:

a. combinations of wages and fringe benefits that result in constant dollar values of total compensation

b. combinations of wages and fringe benefits that result in the same profit to the firm

c. the greatest possible profit attainable from a given level of fringe benefits

d. the greatest possible profit attainable from a given level of wages

10. The slope of a wage-fringe isoprofit curve reflects:

a. the overall profitability of the firm

b. a workerâs willingness to give up an extra dollar of wages in exchange for an extra dollar of fringe benefits

c. the relative âpriceâ of fringe benefits compared to wages

d. an increasing marginal rate of substitution of fringe benefits for cash

11. The firmâs wage-fringe isoprofit curve typically has a slope less than 1 (absolute value) because:

a. fringe benefits confer tax advantages on workers

b. on average, it costs firms more to purchase fringe benefits than workers

c. the composition of fringe benefits may increase worker productivity

d. increasing the proportion of compensation received as fringe benefits reduces a firmâs profit level

12. If a firm can offer fringe benefits worth more than one dollar for a one dollar reduction in wages:

a. the wage-fringe isoprofit line will be upward-sloping

b. the wage-fringe isoprofit line will have a slope less than one in absolute value

c. the marginal rate of substitution between wages and fringe benefits will be greater than one at the wage-fringe optimum

d. as a proportion of total compensation, fringe benefits will likely exceed one half

13. The employerâs share of the Social Security and Medicare components of the payroll tax has increased, from 6.13% in 1980 to its current rate of 7.65%. Because employers pay no payroll tax on many fringe benefits, this change in tax rates has effectively:

a. reduced the âpriceâ of fringe benefits, increasing the slope of the wage-fringe isoprofit line

b. increased the âpriceâ of fringe benefits, increasing the slope of the wage-fringe isoprofit line

c. reduced the âpriceâ of fringe benefits, reducing the slope of the wage-fringe isoprofit line

d. increased the âpriceâ of fringe benefits, reducing the slope of the wage-fringe isoprofit line

14. The trend of fringe benefits as a percentage of total compensation can be partially explained by the fact that:

a. tax reform has rendered many types of fringe benefits fully taxable

b. âin-kindâ benefits restrict workersâ consumption choices

c. the firm may be able to purchase fringe benefits more cheaply than workers

d. many types of fringe benefits are income inelastic

15. Fringe benefits will tend to be a greater proportion of total compensation, the:

a. more income elastic are fringe benefits

b. more they increase worker turnover

c. lower the employerâs share of the Social Security tax

d. less there are economies of scale in purchasing fringe benefits 3

16. Which of the following is not a cause of fringe benefit growth?

a. Tax advantages to the employer

b. Efficiency considerations

c. Economies of scale

d. Fringe benefits are income inelastic

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31. A country's tax system influences the attractiveness of investing in that country and affects the relative level of profitability for an MNC.

a. True

b. False

32. Points inside a production possibilities frontier represent

a. unattainable production combinations

b. efficiency

c. situations where supply exceeds demand

d. unemployment of resources

33. Firms in a high-wage nation like the U.S. can compete effectively with imports from low-wage nations if

a. the U.S. reduces tariffs on imports

b. low-wage nations impose tariffs on U.S. made goods

c. labor productivity is higher in the low-wage nation

d. labor productivity is higher in the U.S.

34. Assume that production in the United States is valued at $100,000. National income is therefore $100,000. Of their income, workers save $2000, pay $6,000 in taxes, spend $89,000 on consumer goods, and spend $2000 on imports. Businesses spend $5,000 in new investment spending. And, foreigners spend $1000 on exports. To avoid any problems of inflation or unemployment, the government should have a budget deficit or surplus of:

a. $2,000 surplus

b. $1,000 deficit

c. $2,000 deficit

d. $1000 surplus

e. $0 deficit

35. Autarky means-----------------------------------------------------------------

a. the absence of government

b. lack of agriculture

c. self-sufficient, in the absence of international trade

d. short of exchange rates

36. The more people there are----------------------, the less the public as a whole will spend on goods and services.

a. unemployed

b. underemployed

c. employed

d. as discouraged workers

37, Which of the following theories holds that countries will produce and export products that use large amounts of production factors that they have in abundance?

a. Mercantilism

b. The theory of absolute advantage

c. The factor endowment theory

d. None of the above.

38. Suppose that a consumer has a marginal propensity to consume of 0.79. If this consumer earns an extra $1220, her saving would be expected to increase by-----------------------------

39. Many countries in Asia, Africa, and South America-----------------------

a. Are developing countries

b. Are industrialized nations

c. Have a high demand for nonessential products

d. Do not trade

40. Which two of the following are regarded as the main aims of the World Trade Organization (WTO)?

a) To eliminate discrimination in world trade

b) To provide financial assistance to countries with debt

c) To reduce tariff barriers

d) To make infant industry protection illegal

e) To help give preferences to smaller economies

b) and e) a) and c) a) and d) c) and e) b) and d)

41. Last year Sophia's nominal income increased by 12% while the price level rose by 5.5%. Consequently, Sophia's real income:

a. rose by approximately 7%

b. fell by approximately 1%

c. rose by approximately 2%

d. ------------------------------------

42. Consumer surplus

a. is always positive.

b. for a particular unit of consumption is computed by taking the difference between quantity demand and quantity supplied.

c. for all units consumed is the area below demand and below market price over all the units consumed.

d. added to producer surplus provides a measure of the net gain to society from the production and consumption of the good.

43. A decline in Real GDP for six or more consecutive months is called-------------------------------

a. A trough

b. A recession

c. An expansion

d. A recovery

44. What do we call the situation where capital grows faster than the labor force?

a. economic growth

b. technological change

c. productivity growth

d. capital deepening

45. The terms of trade are-------------------------------------------

a. the cost of transportation between countries

b. the ratio of wages in two countries

c. the terms which are used in the trade negotiations

d. the rate at which two products can be exchanged

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Question 6: Which of the following economic goals focuses on equal opportunities for education? (5 points)

-Equity

-Freedom

-Growth

-Security

Question 7: Marcel takes out student loans and works part-time to put himself through college. In time, he earns an advanced medical degree and goes to work in an understaffed city -hospital. Marcel's economic decisions benefit the goal of efficiency by (5 points)

-making his own job

-related decisions

-paying back loans to reduce the debt

-contributing to the nation's productivity

-taking advantage of equal opportunities

Question 8: Two countries produce milk and dairy products efficiently. Neither has an absolute advantage. However, Country A exports milk to Country B, and Country A imports cotton from Country B. Which of the following is inferred? (5 points)

-The opportunity cost of producing milk is lower for Country A.

-The opportunity cost of producing cotton is higher for Country B.

-Country A has a natural resource advantage in cotton.

-Country B has a natural resource advantage in milk.

Question 9: Worker hours to produce one unit of natural gas; Worker hours to produce one unit of oil; Brazil 4 9; Argentina 2 10; Mexico 3 7; United States 1 6. According to the chart, which country has the comparative advantage in oil production? (5 points)

-Brazil

-Mexico

-Argentina

-United States

Question 10: The United States can manufacture books at a much more rapid pace than manufacturers in Indonesia. Which of the following is a reason? (5 points)

-Indonesia, as a developed country, has a highly paid and experienced workforce

-Indonesia, as a developing country, has a less advanced manufacturing infrastructure

-The United States, as a developing country, has a high comparative advantage in manufacturing.

-The United States, as a developed country, has a lower cost of living than Indonesia

Question 11: A group of nations establishes a free-trade zone. What is the most likely effect? (5 points)

-Cost of trade increases

-Exports decrease

-Imports decrease

-Trade increases

Question 12: The United States may have a tariff on cotton products from China in order to (5 points)

-prevent Chinese manufacturers from losing profit because of low prices

-protect the business of the American cotton growers and manufacturers

-stop trade due to political disagreement on economic policy

-promote sales in the United States of cotton products from China

Question 13: A Chinese international salesperson hoping to increase exports to the U.S. may worry about the inflation of the U.S. dollar because the inflation may (5 points)

-increase the United States' supply of Chinese products

-decrease tariffs on Chinese products sold to the United States

-increase taxes on the United States' products sold to China

-reduce the United States' demand for Chinese products

Question 14: How would a strong U.S. dollar impact the trade of grain produced in the United States? (5 points)

-U.S. grain exports decrease

-U.S. grain exports increase

-U.S. grain imports decrease

-U.S. grain imports stagnate

Question 15: Which of these can be a result of inflation? (5 points)

-Businesses grow cautious about spending

-The government has to cut spending

-The price of household items increases

-Workers benefit from a lower cost of living

Question 16: If the inflation rate increases faster than their income, people will most likely (5 points)

-use a higher proportion of their incomes on basic needs

-spend a lower proportion of their incomes on basic needs

-get more goods and services for less money

-obtain fewer goods and services for less money

Question 17: To increase your standard of living, your wages must (5 points)

-rise faster than the inflation rate

-rise more slowly than the inflation rate

-keep pace with the inflation rate

-have a negative inflation rate

Question 18: Look at the map showing the European Union (EU) and its free-trade agreement (FTA) countries. Which is true about most current EU free-trade agreements? (5 points)

-The European Union's free-trade agreements are with all of the most developed nations in the world.

-The European Union's free-trade agreements include agreements with both developed and developing nations.

-The European Union's free-trade agreements focus on nations with access to overland trade routes

-The European Union's free-trade agreements focus on the Southern Hemisphere, as distant countries have access to goods not grown in Europe.

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ECON 151 Lecture Notes - Lecture 23: Human Capital, Marginal Utility, Opportunity Cost

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