73: Theories of Income Disitribution

Question 1

marginal productivity theory of income distribution

Answer 1

division of income among factors of production is determined by each factor’s marginal productivity at market equilibrium

Question 2

why do some workers earn more than others? (6)

Answer 2

1) compensating differentials
2) payed equilibrium value of marginal product (diffs in talent)
3) human capital
4) efficiency wages
5) unions
6) discrimination

Question 3

compensating differentials

Answer 3

wage differences across jobs that reflect that some jobs are less pleasant/more dangerous than others (paid more to compensate for unpleasantness)

Question 4

unions

Answer 4

organizations of workers that try to raise wages and improve working conditions by bargaining collectively

Question 5

efficiency wages

Answer 5

when employers pay above equilibrium level wages as and incentive for better performance and loyalty

Question 6

collective bargaining

Answer 6

negotiating contracts between union members and employers, rather than for all individual

Question 7

craft union

Answer 7

unions of skilled workers –> harder to replace during strike

Question 8

closed shop

Answer 8

only union members can be hired (illegal)

Question 9

union shop

Answer 9

all employees must join the union

Question 10

right to work laws

Answer 10

laws that prevent union shops

Question 11

industrial union

Answer 11

union that spans an entire industry

Question 12

union theory

Answer 12

increase wages by increasing demand or decreasing supply

Question 13

how to increase demand for labor (3)

Answer 13

1) invest in human capital to inc MP
2) reduce labor substitutes (ex: reduce min wage)
3) advertise product of union workers

Question 14

how to decrease supply of workers (3)

Answer 14

1) limit union membership
2) licensing to limit ability to enter craft
3) limit immigration