Econ Discussion 11.30.10

Econ Discussion 11.30.10 - unionized firm because the...

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Econ Discussion 11/30/10 Income v. Wealth Wealth is really a store of income for the future. Net worth in dollars in possessions (stocks) Income can fluctuate form year to year, you can win the lottery and have high income but not be wealthy. Monopoly vs Monopsony Monopsony = when you only have one buyer Monopoly = when you have one seller (i.e. sole provider of labor) - labor unions essentially get together (people who are skilled at their task), and hopefully for themselves negotiate higher wages - Downside = for some people, goods become more expensive because of unions o Ex. Metro workers are on strike so you can’t take a train anywhere - Positive = Tend to see unions a lot when the work is particularly dangerous o If you’re a miner, then you would unionize to increase working conditions o Unions will negotiate contracts with their employers to raise wages, through the power of group cohesion force Average cost curve for a firm who has been unionized will be overall higher than a non-
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Unformatted text preview: unionized firm because the unionized firm requires excess income to be allocated to its workers. Unions works best in markets with inelastic labor demands-Pilots union (There’s not many substitutes for pilots who have had training and the ability to fly a plan), o Labor unions are more likely to develop in these cases Economic Rent : Def: portion of resources total earnings above opportunity cost -Most often hear it when we hear people say firms tend to be rent seeking-When you’re making profit, firms want to enter your industry so your profit will go away-Being a rent seeker means you want to create some barriers to ensure your profits never go away o If you’re a barber you lobby the government to pass legislation that you need a license to cut hair, so you keep supply limited and competitors low Rent seekers (want to protect their own space) Increasing Cost Industry...
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This note was uploaded on 02/24/2011 for the course ECON ECON 201 taught by Professor Elzinga during the Spring '09 term at UVA.

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