Goal is to shift demand curve to the right produces

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perfectly competitive market). Goal is to shift demand curve to the right. Produces product differentiation Informative advertising- price, quality, availability info Part of product advertising- “branding”, no info given Pros of advertising: informs consumers, may enhance enjoyment of product, lowers costs of some products Cons of advertising: can be manipulative, can increase monopoly power, provides a barrier to entry Chapter 18: The Labor Market Firms= demand People= supply A firm is willing to hire a worker when the worker increases the firm’s revenues more than the firm’s costs. Marginal product of labor (MPL): increase in revenue created by hiring an additional worker The marginal product of labor falls as more labor is used. Diminishing returns to labor More generally, diminishing returns to any factor of production. Individual: Higher wage = more leisure Market= Higher wage= more entry= more hours worked Labor Market Equilibrium: MPL=W intersection of market supply and demand curves for labor Hire workers when MPL > W Human Capital Theory: treats acquisition of education and training as “investment” decisions by individuals. Assumes individuals treat these decisions as rational investment decisions and compare benefits (future earnings gains) against costs (opportunity cost of time, tuition, etc.). Compensating Differentials : difference in wages that offsets differences in working conditions. non-monetary factors. Always supply Unions : restrict supply, threaten to strike = higher wages Two types of discrimination: Statistical Discrimination – decisions about individuals based on group characteristics. Preference-based Discrimination – can be based upon employer, employee, or customer preferences. Customer version is harder to “compete” away and has fewer legal remedies. Employers who practice employment-based discrimination are not maximizing profits. Employers who do not discriminate will earn higher profits than those who do. In a competitive market, discriminating employers will be displaced by employers who do not discriminate in the long-run. In this sense, competitive markets tend to erode discrimination. Chapter 19: Public Goods Chapter 20: Political Economics and Public Choice Normative Statement – implies a value judgment, often (but not always) include explicit or implicit “should.” Positive Statement – testable or can be proven – does not express values or judgments. Rational Ignorance – Benefits of being informed are less than the costs of becoming informed. i.e. Consumers have a strong incentive to be informed (spending money), but voters have less incentive (effect of 1 vote). Chapter 21: Economics, Ethics, and Public Policy Meddlesome preferences - about other people’s actions, even though they do not affect you Fair and equal treatment - belief that the protection of equal access is important enough that it should be pursued, even if it entails some level of economic cost Cultural goods and paternalism - belief that cetain cultural goods are important for a socity and must be
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