CLEP Microeconomic Notes 1

60 non exclusive good common goods and public goods a

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60) Non-Exclusive Good – Common Goods, and Public goods a) is a good everyone has access to (no one can be excluded) 61) Excludable – Private Goods and Club goods a.i.1.a.i.1. Excludable Non-Exclusive 62) Rival Private Goods (cars) Common Goods (national parks) 63) Non-Rival Club Goods (cable t.v.) Public Goods (national defense) 64) Public Goods – aka Collective goods a) Ex: national interstate system, military (national defense), education, law enforcement a.i) People do not pay for public goods, they are available to everyone b) Non-rival and Non-exclusive 65) Progressive Tax – increases as income increases
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Most effective way to deal with income disparity 66) Proportional Tax – aka “Flat Tax” – has no effect on income inequality a) Ex: 20% tax for everyone 67) Regressive Tax – a tax that imposes equal amounts on employees and employers a) Ex: social security 68) Prospective Payment System (PPS) – a system implemented in 1980’s as a result of rapid healthcare costs that pays the same amount (one price) to hospitals and doctors based on the service. a) A preset reimbursement rate 69) Total Physical Product (TPP) 70) Marginal Physical Product (MPP) - the extra output gained by one more unit of input a) Examines the TPP prior to adding a unit of input and again after adding a unit of input b) MPP = TPP (after unit is added) – TPP (prior to adding unit) 71) Marginal Revenue Product (MRP) – is additional revenue that can be earned by adding one unit of labor a) As long as marginal revenue is greater than or equals one unit of labor, the firm should hire additional worker b) A firm should continue to hire workers until: b.i)MRP = Wages (W) (marginal revenue product = wages) c) Since Wages (W) is the same thing as Marginal Expenditure (ME), the formula can also read: c.i) MRP=ME (marginal revenue product = marginal expenditure) d) An increase in the price a firms product will increase the firm’s demand for labor 72) Positive Number - Marginal Physical Product – if the total output of a product does increase when variable resources are added, such as labor 73) Negative Number – Marginal Physical Product – if the total output decreases when variable resources are added. 74) Average Physical Product (APP) - average amount produced per worker, it does not look at marginal physical product (MPP) a) Found by dividing the total amount by the number of workers a.i) 1 worker = 20 loaves a.ii) 2 workers = 33 loaves a.iii) 3 workers = 43 loaves a.iv) 4 workers = 49 loaves a.v) 5 workers = 50 loaves (a.v.1) APP = 10 loaves (50/5) (a.v.2) With 5 workers the MPP is one loaf of bread (a.v.3) The diminishing returns occurs when the 3 rd worker is added (a.v.4) TPP increased after adding each worker 75) Law of Diminishing Returns – if adding an additional worker does not provide as great a benefit as adding the last worker a) When does the law of diminishing returns begin? a.i) 1 worker produces 15 units (+15)
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60 Non Exclusive Good Common Goods and Public goods a is a...

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