Economics Ch. 7/8

Market Structure, Employment, Labor, Wages

Laissez-Faire

Philosophy that government should not interfere with commerce or trade

Market Structure

Nature and degree of competition among firms operating in the same industry

Perfect Competition

Large number of well-informed independent buyers and sellers who exchange identical products

Five conditions that characterize perfect markets

large number, identical, independently, reasonably well-informed, free to enter/conduct/get out of business

Imperfect competition

A market structure that lacks one or more of the conditions of perfect competition

Profit maximizing quantity of output

marginal cost of production is equal to the marginal revenue from sales

Monopolistic Competition

Market structure that has all the conditions of perfect competition except for identical products

Product differentiation

Real or imagined differences between competing products in the same industry

Nonprice competition

The use of advertising giveaways, or other promotional campaigns to convince buyers that the product is better than another brand

Oligopoly

Market structure where few, very large sellers dominate the industry

Collusion

Formal agreement to set prices or to otherwise behave in a cooperative manner

Price-fixing

Agreeing to charge the same or similar prices for a product

Monopoly

Market structure with only one seller of a particular product

Economies of scale

Situation in which the average cost of production falls as the firm gets larger

Natural monopoly

Production of a product from a single firm, which has benefits

Geographical monopoly

Monopoly based on the absence of other sellers in a certain geographic area

Technological Monopoly

Market structure with ownership or control of a manufacturing method, process, or other scientific advance

Inadequate competition

What curbs efficient use of scarce resources?

Externality

Unintended side effect that benefits or harms a third party not involved in the activity that caused it.

Public Goods

Products that are collectively consumed by everyone, and whose use by one individual does not diminish the satisfaction or value available to others.

Trusts

Legally formed combinations of corporations or companies

Price Discrimination

Practice of charging customers different prices for the same product.

Case and desist order

Federal Trade Commission ruling requiring a company to stop an unfair business practice, such as price fixing, that reduces or limits competition among firms

Civilian Labor force

Men and women 16 years old and over who are either working or actively looking for a job

Craft/trade union

An association of skilled workers who perform the same kind of work

Industrial union

An association of all workers in the same industry, regardless of the job each worker performs.

Lockout

Refusal to let the employees work until management demands were met

Company union

Union organized, supported, or run by employers

Great Depression

The greatest period of economic decline and stagnation in United States history

Norris-LaGuardia Act of 1932

Prevented federal courts from issuing rulings against unions

Wagner Act

Established the right of unions to collective bargaining

Fair Labour Standards Act

Fixed a federal minimum wage for many workers and established time-and-a-half pay for overtime

Right-to-work law

State law that made it illegal to force workers to join unions as a condition of employment

Independent unions

Unions that do not belong to the AFL-CIO, such as the Brotherhood of Locomotive Engineers

AFL-CIO

Combination of two unions formed in 1955 that set up unions in industries that hadn’t been previously unionized

Closed shop

Situation in which the employer agrees to hire only union members

Union shop

Workers do not have to belong to a union to be hired

Modified union shop

Workers do not have to belong to a union to be hired and don’t have to join one to keep their jobs

Agency shop

Worker isn’t required to join a union, but they must pay union dues

Grievance Procedure

Provision for resolving issues that may come up later

Mediation

Process of bringing in a neutral third person to settle a dispute

Arbitration

Process in which both sides agree to place their differences before a third party whose decision will be accepted as final

Fact finding

Agreement between union and management to have a neutral third party collect facts about a dispute and present nonbinding reccommendations

Injunction

Court order not to act

Seizure

Temporary takeover of operations

Six ways to resolve disputes between parties

Mediation, arbitration, fact finding, injunction, seizure, presidential intervention

Unskilled labour

Those who work primarily with their hands

Semi Skilled Labor

Operate machines that require a minimum amount of training

Skilled Labor

Operate complex equipment

Professional Labor

Highest level of knowledge-based education and managerial skills

Labor Mobility

Ability and willingness of workers to relocate in markets where wages are higher

Traditional Theory of Wages

Supply and demand for a worker’s skills and services

Theory of Negotiated Wages

Bargaining strength determines wages

Signaling Theory

Employers pay more for people with indicators of superior ability