Economics

Analytical information is very important in any venture. In business however, this practice is not only necessary but also a sufficient condition for success. Asset management needs a lot of inventory recording and analysis of the inventory. The management of assets will involve taking full custody and managing of both fixed and liquid assets. While this industry may offer sufficient returns, the maintenance of requisite data plays a key role in getting maximum returns from the business. My company has had a problem of having a longstanding stock. This has generally jeopardized the general course of the company.

Having been entrusted with the management of the asset department in the management company, it emerged that the dead stock mainly comprised housing unit of single bedroom and bed-sitters. A further interrogation of the data revealed to me the houses with the high cost were doing well. I chose to take a deeper analytical interpretation of the data and after the analysis, report adequately to the management (Akhtar M, 2001, p 67).

I did analyze the inventory on sales, costs and nature of the assets basis. The records were quite massive and to reduce the fatigue of analyzing the entire data, I sampled out the last 45 days of the trading period. Within period, I did assume no further acquisition of assets were undertaken, market trends remained same and strictly stuck to the data that was available at that point in time. At the very onset, it looked so apparent that transactions on mansions, triple bedroom and double bedroom had a relatively high rate of turnover compared to single and bed-sitter.  The sampling was randomly done ensuring the chronological filing system offered the highest confidence level. Given that there were no initial researches undertaken on the same, the cumulative frequency was used to establish a sample with the least tolerance and with the highest confidence level.

The data available had the major components of cost of the house, nature of the house number of units sold monthly and cumulative revenue. This data was considered for a period of 45 days it was representative to the effect reflected in a cumulative frequency table, after the table was analyzed it emerged that, the variance was quite high. This was indicative of the fact that there were a lot of fluctuations in market trend. This was as a result of the limited demand exhibited by the bed sitters. Similarly this high variance was directional in a sense that the relative returns from the venture in general were not promising enough.

The discrete nature of the data in question made calculations quite easy. In this research finding there were no suites that were sold in part. The housing suites were only sold in full. This makes the idea of rounding off out of question.  Besides, the whole numbers made calculation of the various measures of dispersion and measures of central tendency quite easy.

From the table and chart, it is evident that the company has invested in relatively many units of bed-sitters however the turnover of the bed sitters is quite low. The mansions on the other hand tend to strike a balance between initial stock and sales. The implication being that at the end of the trading period, closing stock in terms of units for mansions is quite low. The concept of turnover is reached at though the utilization of the concept of average sales per week. If the average sales per trading period are high it is indicative of robust business trend.

It is likely that the variances means, standard deviation and other instrumental measures may take continuous forms. However, the fact that the starting point will offer some easy of working with the figure.

The probabilities of disposal display a further need for review of the stocks. The probability during the duration that any bed-sitter would be sold was
No. of bed-sitters sold
 Initial No. of bed sitters.
13
130 0.1
The probability that a mansion would be sold at any time during the period was
 No. of mansions sold
   Initial Number of mansions
20
0.95.
The probability that a double bedroom would be sold at any given time by the company
No. of double bedroom
   Initial Number of double bedroom
64
0.89
The probability that a double bedroom would be sold at any given time by the company
No. of single bedroom
   Initial Number of single bedroom
23
65                   0.35
The probability that a double bedroom would be sold at any given time by the company
No. of triple bedroom
   Initial Number of triple bedroom
51
   56                0.91
Data adapted from Akhtar M, p. 142

From the probabilities, it is evident that the likelihood of an asset being disposed of at a given time increases with increase in cost price. Apparently, the demand relationship within the business environment in the setting of the company assumes a Veblen goods curve.

The overview model for the general disposal of assets within the company assumes a curve such as represented below

If the above model analysis if anything to go by, then the company has to reduce the investment in bed sitters.

Given that within the period the turnover for the double bedroom, three bedroom and the mansions is relatively high the company will opt to invest every single shilling from the bed sitters, into either double, triple and mansions.

In making decisions on the best stocks to be handled by the management company I will consider the asset that is highly demanded relative to its capital base. Within the strength of this argument mode will be most applicable. The mode in this context will be represented by the probability of sale of the assets. However, because the capital base of the company is not as sufficient, I will consider relatively small portions of the low moving stocks to cater for the customers in this cadre. The central asset will equally be given high priority this is because the capital base is relatively low and their turnover relatively high (Saleemi, S A., 1983, p 43)

From the analysis above, it is evident that the market base of the company is majorly the upper and the middle class. This is evident from the fact that demand is quite high for the expensive assets. It is also evident that investing much into the cheaper assets would only increase the number of assets but this increase in the value of the assets may not be reflected in the general turnover of the company. It is therefore plausible that if the company has to maintain investments in the bed sitters and single bedroom houses, then a market should be explored elsewhere.

In conclusions, if capital is not limiting, to reap maximum out of business the market base should be analyzed to identify their relative consumption abilities. Further, the values and aspirations of the market base should be well studied to avoid unnecessary dead stock. This way, the business will have a sufficiently high turnover which will be accompanied by increased profit, ceteris Paribas.

The recent economic crisis that shook the world was famously perceived as the brainchild of the sub-prime mortgage fiasco in America. The root of the crisis was the housing bubble, and the root of the housing bubble was, interestingly, another bubble. The trouble in the housing market started in the mid-90s when stock prices also increased beyond normal levels. With the slow recovery of the US in the 2001 recession, the Fed decided to lower interest rates. In theory, this monetary policy easing will enable the market to rebound. But somehow, that did not happen in the long run, particularly in housing.

As the prices of housing increase, it turned to expectations, making people buy more homes at the present in fears of higher house prices in the future. The Fed explained that the aggressive monetary policy in 2002 and 2003 was motivated by (1) weak economic recovery after 2001 recession (GDP growth was just above 2, unemployment reached 6), and (2) fears of deflation. More so, they have explained thru the Taylors rule that there is no significant link between monetary easing and appreciating house prices. However, the Austrian School argues that if the Fed did not use monetary policy easing, bubbles like the tech bubble of the late 90s and the recent mortgage crisis could have not happened. The theory believes that the new money directed to housing will eventually lead to bubbles, which led the housing market reached its performance threshold in 2005, until everything collapsed on its path.

The shift from rental market to residential market was popular it brought more homes in the market but this actually stresses the notion that artificially low interest rates by the Fed discourage people from saving money and give them the incentive to borrow more for consumption and speculation. The high demand for homes due to cheap credit has invigorated a loan-hungry economy making more Americans indebted as a result.

Speculative Bubbles in the US Housing Market
Introduction
The very recent recession was a reminder of how markets can get spent when policies and financial instruments dictate the behaviour of the common man. The crisis was famously perceived as the brainchild of the sub-prime mortgage fiasco. The increase in homeownership according to the Goodman and Thibodeau (2008) may be due to (1) lowest interest rates in decades, (2) higher demand for homes by single-person households, (3) eradication of the wealth constraint for buying homes in the US mortgage market, (4) continued popularity of the sub-prime mortgage market, and (5) rise of the home-equity mortgage market. The root of the crisis was indeed the housing bubble, and the root of the housing bubble was, interestingly, another bubble.

The Bubble
Baker (2008) argued that the bubble in the housing market started in the mid-90s when stock prices also increased beyond normal levels. By virtue of this increased wealth from stock earnings, consumption readily stepped up, slowing savings rate borne out of disposable income. A bigger home was on the list. Hence, the great tumble of 2007-2009, nearly realizing Great Depression version 2.0. The domestic crisis spilled world over making it the worst in the Post-World War II era (Bernanke, 2010).

The second phase of the bubble according to Baker (2008) was state-led. The slow recovery of the US in the 2001 recession paved the way for the Fed to lower interest rates. This pressured housing prices to move upwards. From 2002-2006, there was about 30 increase in house prices (see Figure 1). Eventually, more construction was seen. To make matters worse, consumption boomed further as savings slid deeper. Goodman and Thibodeau (2008) said that during the first half of the decade, rate of homeownership in the US went up from 66.9 in 1999 to 69 in 2005. A percentage increase is equivalent to roughly 1 million units of houses owned. On the supply side, input costs also increased during the said period.

The last phase of the bubble was the burst in 2007. During this period, housing was overdone as an over-supply of homes could no longer support prices (Baker, 2008). Resident population in the US was 282,403,000 in July 2000 increasing to 296,639,000 in July 2005 (Goodman and Thibodeau, 2008). They also obtained estimates on the number of households, which was recorded at 104.7 million in March 2000 and 113.15 million in 2005. So there is a 5 increase in resident population as opposed to an 8.1 increase in households. This is attributed, according the US Census, to a decrease in the average household size.

Comparative Statics Equilibrium Analysis
In the short run, using supply and demand analysis, supply of homes was relatively fixed (in the discussed scenario). So the increase in demand for homes catapulted the price of homes (see Figure 2). As the prices increase, it turned to expectations, making people buy more homes at the present in fears of higher house prices in the future. So we can see here a two-step effect of an  increase in demand for houses direct increase in price and an indirect effect on prices due to future consumer expectations.
With the high demand for homes spilling over until the early part of this decade, producers cramp up to build more, making the second phase of this housing bubble a supply-side affair. Housing in 2002 was 25 more than the years 1993 to 1995, the start of the bubble. In Figure 3, simultaneous demand and supply effects are imperative in long run equilibrium analysis. Here, a new equilibrium is reached at higher prices as increases in demand for housing exceeds the increases in the supply of housing.

The Warring Schools of Thought Bernanke Economics and the Austrian School
Bernanke Economics
Bernanke (2010) contested that regulation is key to curb another crisis. Financial regulators and the private sector must be more watchful in monitoring and controlling risk-taking. He said that the lesson learned from this recession is that it did not only expose weaknesses in regulator oversight but also gaps in the way financial regulations are built. He however dismisses the conjecture that excessively easy monetary policy by the Fed caused the bubble in house prices.

The Fed explained that the aggressive monetary policy in 2002 and 2003 was motivated by (1) weak economic recovery after 2001 recession (GDP growth was just above 2, unemployment reached 6), and (2) fears of deflation (Bernanke, 2010).

Figure 4 shows the yearly increase in nominal house prices from 1978-2010. House prices in the late 90s regained lost ground after some years of slow growth. Prices grew at 7-8 annually in 1998 and 1999, and ranged from 9 to 11 in 2000-2003. So the increases in housing prices came before the period of highly accommodative monetary policy. The most rapid price gains were in 2004 and 2005, when the annual rate of house price appreciation was between 15 and 17 percent. Thus, the timing of the housing bubble does not rule out some contribution from monetary policy (Bernanke, 2010).

Figure 5, on the other hand, explains the nations position relative to the world in terms of monetary easing. The cross-country comparison evidences the link between monetary policy and house price appreciation. The y-axis shows the change in real (inflation-adjusted) house prices in each country from the fourth quarter of 2001 until the third quarter of 2006, a period that spans the sharpest period of price appreciation in most countries. Countries further above the scatter plot exhibit higher housing price appreciation. The US is located way below although large in absolute terms. The x-axis of the figure shows the degree of monetary policy ease or tightness in each country, measured by the average deviation of policy in each country from the prescriptions of a standard version of the Taylor rule over the corresponding period. Nations, like the US, on the left of the y-axis have more accommodative policies as per Taylor rule prescriptions. It is interesting to note that all countries have easy monetary policies as they mostly converge to that region. Nevertheless, as shown by the r-squared (which is just 5), the relationship between monetary easing and house price appreciation is very weak, and thus, insignificant (Bernanke, 2010).

Following the Austrian business cycle theory (ABC theory), if the Fed did not use monetary policy easing, bubbles like the tech bubble of the late 90s and the recent mortgage crisis could have not happened (Thornton, 2010). The theory believes that the new money directed to housing will eventually lead to bubbles, which led the housing market reached its performance threshold in 2005 (Baker, 2007). The incremental resources for the housing sector will be more compared to other sectors, e.g. manufacturing. As a result, construction speeds up, while other sectors like manufacturing will suffer from high input costs and lower outputs (Thornton, 2010).

In a bubble, home prices increase, Thornton (2010) explains. This will fuel more constructions as labour migrates to the well-funded sector, and as a result, an increase in wages and prices of materials and land to keep up with the rising prices. The shift from rental market to residential market was popular it brought more homes in the market (Baker, 2007). The Austrian approach is however not conservative (Thornton, 2010), as it does not only look at prices to determine bubbles but also the inflating quantity (number of homes). Overbuilding in the prior years of the bubble was evident, as vacancy rates increase (Baker, 2007). So in the eye of the Austrian thinkers, a misallocation of resources was the real culprit.

The Austrian school uses savings rate as a measure to test the existence of a bubble. Figures 6 and 7 shows the effect of the interest rate-led easing to the savings rate of Americans. It is apparent in Figure 6 that Americans lost much of their savings in exchange of the investment promises of housing. Figure 7 shows the positive relationship of low mortgage rates (price of borrowing for home loans) to saving rate. The financial industry contributed heavily to the bubble as they offered attractive mortgage instruments to cater the skyrocketing housing needs of the population (Baker, 2008). From just fixed rate mortgages to adjustable rate mortgages, it went further until sub-prime mortgages and Alt-A mortgages were issued. These are mortgages designed for those with poor credit histories. Alt-A mortgages are for those with mixed credit records. This further stresses the notion that artificially low interest rates by the Fed discourage people from saving money and give them the incentive to borrow more for consumption and speculation (Thornton, 2010).

Figure 8 shows the credit market debt outstanding of Americans from the 1950s to the present. It is very clear in the graph that the American people have borrowed too much increasing its pace the last three decades. The high demand for homes due to cheap credit has invigorated a loan-hungry economy making more Americans indebted.

Conclusion
Fundamental economic analysis can rigorously describe speculative bubbles in the housing market. Price appreciations, according to some critics especially state policy purists or interventionists, that can no longer be controlled by the invisible hand or are no longer self-correcting maybe needs more than government help, but also assistance from the consumers who are directly affected by banes inherent in the impure market economy. The psychology of the consumer can be tapped by producers but can never be stopped when it comes to spending habits. So the initial step always rests on the producers, and then the state.

The US housing bubble can be alternatively analyzed as the crest and the crisis or recession as the trough of business cycles. There will be times when an economy inflates or when it deflates. However, central to the goals of economists and governments is how to curb such events from happening and thereby lessening, or at best avoiding, its impacts. The Feds efforts may have been challenged by workable and valid economic theories but in all prudence, its job to secure a better future for Americans (and consequently the rest of the world) must first be prioritized. It  suggests that the best response to the housing bubble would have been regulatory, not monetary. Stronger regulation and supervision aimed at problems with underwriting practices and lenders risk management would have been a more effective and surgical approach to constraining the housing bubble than a general increase in interest rates (Bernanke, 2010). In a way, the Fed is better in providing solutions than explaining itself from previous actions. Is that the reason why it is deemed as a super-regulator The answer, nevertheless, remains to be seen.

Non-use benefits are beneficial utilities that one may obtain from environmental resources without having to physically interact with the natural source. For instance, there are a lot of people who are afraid of poisonous snakes like vipers however, there are those who are still willing to spend their own money for the protection of the snakes and their habitat.

Some people are encouraged to do such because of the so-called Option Value Benefits. These are assumed benefits valued for future endeavors, so to speak benefits which may be obtained for future purposes once a given natural resource is preserved. Vipers, for instance, are in fact dangerous and risky to human existence but considering that snakes venom may hold medicinal value, some people choose to hold the option in favor of the animals protection, despite the possible risks it may cause them.

In order to calculate as to which of the two consequences holds more value (medicinal value one acquires versus the possible risks one obtains), the use of measurement benefit concepts should be taken into consideration. These are measured based on ones willingness to pay (WPT) and willingness to accept (WPA). The former suggests that there is a possibility that an individual might use a considerable amount of money in exchange for an environmental good which is a part of his or her demand curve, so to speak a part of his or her personal need. Although, an individual also has to consider the amount of money he or she will be loosing in the future because of the preservation of a particular natural resource in this case, the snake and its habitat.

Thus, it is true indeed that the difference between WPT and WPA is smaller if there are a lot of available substitutes for that particular natural resource and bigger, if resources are limited. In this case, the more that the individual thinks of the benefit he or she can obtain for having the snake and its habitat preserved than the risks he or she might get for tolerating it, is only a manifestation that it is in fact hard to find a substitute for the snakes venom as a medicinal ingredient.

In the United States its citizens are the victims of inflationary forces in its healthcare system. The annual prices in of the US healthcare are increasing at an alarming rate of 14. In the United States people and companies pay for healthcare plans. Despite the high cost Americans received some of the best healthcare in the world. Due to the cost certain politicians and many interest groups believe that an alternative solution that could fix the problem is to select a universal health care plan. A universal healthcare plan implies that the government picks up the entire healthcare bill. The measure does raise the income of the people by reducing their living expenses associated with healthcare, but it also reduces the quality of the healthcare they received. The most common tool used by governments that have universal healthcare is rationing. Rationing means limiting the amount of healthcare provided to participants of the plan. The actual mechanism that leads to rationing is time delays. In Canada for example people have to wait several months before receiving the care because of rationing.

Questions (4)
1.
The outcome in a scenario is which food was the item being rationed instead of healthcare would be much different due to the nature of the product. Waiting for food is not an alternative since people are supposed to eat three times a day with a consumption of at least 2000 calories. The situation would be similar as the government being the primary provider. The cost of food would go down as well in this food rationing in comparison with the free market because the government would be eliminating the middleman.

2.
If American were not satisfied with the healthcare they receive they could go to Mexico to receive treatment. Since Mexico is developing countries they can provider cheaper healthcare. Since the dollar is valued much higher than the Mexican peso the American patient has bargaining power. American can order drug prescriptions from Canada where the cost of drugs is much cheaper than in the United States.

3.
Health insurance companies are private entities. The private industry is typically more efficient than the government because they do not have to deal with bureaucracy. Also the private industry has many years of experience dealing with the healthcare systems. In the United States the government has never played the role of the provider of services. It is inevitable that inefficiencies may occur due to learning curve considerations.

4.
People need as much healthcare as possible. There should never be any limits to the amount of healthcare a person receives. To me the things that happen in Canada as far as rationing of healthcare are an atrocity. When a person is sick he should have wait for long periods of time prior to receiving the care. The person would get worse and in critical patient die prior to receiving the care.

Alternative solution
After reading the article Rationing Health Care I believe that might not be so easy for the US to adopt a universal healthcare system. The free market works, but in the United States the prices are out of control. The government could regulate the industry to control prices such as what is done in certain agricultural and food products such as milk whose price is standardized in many states and US territories.

Research Statement
The relationship between female labor supply and its various implications like marriage, fertility, family earnings distribution and male-female wage differentials poses questions on how the behavior of female work force distribution is influenced by job heterogeneity (Female Labor Supply A Survey Killingsworth, Mark R.  Heckman, James J. 1986). In order to understand female labor supply, it would more sufficient to look at its significant facts as manifested in Western economies in the modern period.

Furthermore, there is a need to use theoretical and empirical models in order to come up an appropriate conclusion which would satisfy the question as to how heterogeneous jobs play an important role in defining the nature of female labor supply particularly in Western nations.

Brief Literature Review
Women Labor Participation in the Twentieth Century
In most developed economies, the growth of women participation in the labor market had become a striking feature in the twentieth century. Participation growth began at various times but it was only in 1960s when it became eminent (Female Labor Supply A SurveyKillingsworth, Mark R.  Heckman, James J. 1986). In the United States (1890 to 1980), women participation was highest among females age 20-24(67.8), second within 25-44(64.9) and third within 45-64(50.5) (U.S. Department of Commerce, Bureau of the CensusCensus of Population 1890-1980 Cited in Killingsworth, Mark R.  Heckman, James J.). In Canada (1911 to 1981), female labor force participation was highest among age 25-44(65.2), second was 19 and below (61.2) and third within 45-64(46.3)(Census of Canada 1911-1981 Cited in Killingsworth, Mark R.  Heckman, James J.). Great Britain (1891 to 1981) recorded its highest among women age 20-24(69.3), second within 25-44(59.5) and third age 20 and below (56.4)(Department of Employment and Productivity, British Labour Statistics Historical Abstract 1886-1968, London HMSO Cited in Killingsworth, Mark R.  Heckman, James J.). In Germany (1895 to 1981), women participation is highest among females age 20-24(71.0), second within 25-44(58.4) and third within 14-19(40.4) (Statistiehes Jahrbuch 1962  Yearbook of Labour Statistics 1975 Cited in Killingsworth, Mark R.  Heckman, James J.). With the exception of Germany (by which female participation rate changed minimal since 1946), the rest showed gradual increase in female labor participation until recent recorded periods.

The participation growth was dominantly attributed to the increasing number of involvement among married women in the labor market. Relatively, the participation of single women decreased in the United States and Britain. However, participation rate of the nonmarried remains higher than married females in total. In contrast to women labor supply, male participation has been decreasing since the first quarter of the twentieth century (Female Labor Supply A SurveyKillingsworth, Mark R.  Heckman, James J. 1986). Weekly hours worked, however, decreased in both men and women.

Qualitative Changes as Induced by Heterogeneous Jobs
Females Working Character
 Apart from the quantitative changes of labor supply in women, there also occurred qualitative modifications.  The increase of women labor supply in respect to heterogeneous jobs had resulted to changes with respect to the females working character more and more women started to hold white collar, so to speak clerical jobs at the onset of the twentieth century (Female Labor Supply A SurveyKillingsworth, Mark R.  Heckman, James J. 1986). What became more surprising was that the rate of women participation in white collar jobs occurred even faster relative to men. This implied how significant white collar jobs are to most people (regardless of gender) as the economy grew wider. In 1900, 20.2 percent of the female workers in the United States held white collar jobs, way lower compared to 65.6 percent in 1980 (Female Labor Supply A SurveyKillingsworth, Mark R.  Heckman, James J. 1986). The growth rate was higher compared to mens, whose white collar job participation increased by only 2.3 percent relative to womens at 10 percent.  As women concentration in  clerical jobs increased from periods 1900 to 1980, women participation in service and blue collar jobs decreased whereas, mens participation in both was relatively increasing but in a slow phase.

Education, Marriage and Ethnicity
One of the factors which stimulated women participation in highly competitive jobs is education. In both United States and Britain, educational attainment among women increased that is, women who finished four or more years in college rose to 50 percent (even though women educational attainment growth was slow in the United States from 1926 to 1930). In fact in 1980, 20.5 percent of women (aged 25-29) in the United States had finished 4 years in college (Table 2.19 United States Schooling completed by the female population, by age, 1980 Cited in Killingsworth, Mark R.  Heckman, James J.). In Great Britain (1981), 8.1 percent of women (aged 25-29) finished higher education (Table 2.20 Great Britain Highest educational qualification attained by female population in 1981 by age Cited in Killingsworth, Mark R.  Heckman, James J.)

If there is one aspect which had implied dramatic fluctuations in women labor involvement (1890 to 1980), was mainly because of female distribution by marital status (in spite the increased participation of the nonmarried). In 1890, the proportion between married and nonmarried women was equal however, it varied from 1890 to 1980. Within the period, 50 percent of females aged 20 to 24 were married (Female Labor Supply A SurveyKillingsworth, Mark R.  Heckman, James J. 1986). In 1960, however, 70 percent of the women within the said age bracket were married.

In the United States (1890 to 1950) alone, fertility rose in 1920 but declined in 1940 (Female Labor Supply A SurveyKillingsworth, Mark R.  Heckman, James J. 1986). Fertility rate in 1950 was below and almost similar to that of 1910 (perhaps due to the Great Depression). Older works (such as Mincers in 1966) suggested that participation among married women was procyclical in the United States and moreover, teenage participation is sensitively influenced by cyclical variation (Female Labor Supply A SurveyKillingsworth, Mark R.  Heckman, James J. 1986). In short, this section argues that women labor participation is closely influenced by educational attainment and marital status among females. The higher the educational attainment is, the higher the probability of acquiring a job.

Other factors are embodied by the fact that white single women (age 65 and below) had higher participation rate relative to black single women (age 65 and below). However, black single and black married women have a higher participation rate than their white counterparts. Also, the number of children or dependents in the family is one of the determining factors which influence women job involvement. The higher the number of dependents, the greater probability it is for both men and women to find sources of income.

Economic Theory and Model
Theory on Utility
There were some approaches used to analyze labor supply using the job heterogeneity model. In 1956, Tinbergen emphasized the relationship between the choice of the amount of job characteristics and the desirable job characteristics (Female Labor Supply A SurveyKillingsworth, Mark R.  Heckman, James J. 1986). The assumption states that these variables caused income reduction but increased utility, assuming that all types of work required similar number of hours.

The first approach to utility theory focused on the combined determination of labor supply and continuous job characteristics (treated as consumer goods). In 1982, Atrostic specified utility as a function of consumer good, leisure time and job characteristics (Female Labor Supply A SurveyKillingsworth, Mark R.  Heckman, James J. 1986). If desirability of job characteristics stimulates compensating wage differentials, then wage rate becomes its dependent variable (similar to how consumer expenditure works).

The second approach to utility theory focused on the combined determination of labor supply and the individuals discrete choice given the availability of different jobs (Female Labor Supply A Survey Killingsworth, Mark R.  Heckman, James J. 1986). In 1985, Killingsworth specified and defined utility as a dependent variable to the job which an individual has (wage rate and exogenous income remained equal) and that wage rate may vary from one job to another that is, an individual may receive different wage rate depending on ones choice of job (again wage rate, job choice and working hours are endogenously treated).

Heckmans Regression Model
The inclusion of job variables in labor supply functions creates a dilemma simply because they are considered choice variables (factors like job characteristics) and thus, cannot be provided with a consistent estimate due to its endogenous nature. As a result, job variables are determined along with the number of hours worked. Variations in job variables are accorded with wage differentials compensation and so, wage rate becomes a choice variable too (Female Labor Supply A SurveyKillingsworth, Mark R.  Heckman, James J. 1986).  In order to do this, we consider the regression of hours of work (H) on the wage (W), exogenous income (R), a background characteristics vector (X) and a job variable (J) which may be represented as H a  bW  cR  kX  jJ  e (where e is an error term). However, the estimate of j cannot be consistently provided by fitting least squares because J is endogenous and thus, it is determined along with H. In line with this, compensating wage differentials (W) which is now a choice variable, influence differences in J, so least squares estimates may also yield biased estimates of b. Furthermore, if the individuals choice of J depends on X elements (schooling and age), e and elements in X shall be correlated and thus, may again yield biased estimates of k on X elements. To sum it up, there is a need to revise or extend existing estimation strategies. Whereas by ignoring J, the model now appears to be H a  bW  cR  kX  u (where u is a composite error term given by u  e  jJ) and fitting by least squares results to biased estimates of all its parameters. This is due to the fact that J and W are jointly determined (based on conventional compensating differentials). As a result, labor supply is optimized and consequently, H is added to the list of endogenous variables. Therefore, u shall be correlated with W, R and X. In short, H a  bW  cR  kX  jJ  e is a labor supply function while H a  bW  cR  kX  u is a labor supply locus.

Rather than statistical, the basic issue appears to be behavioral in nature. Wages, number of hours worked and job characteristics become an individual option (endogenously chosen) with the availability of heterogeneous jobs. In spite the consistency of parameter estimates, choice of hours worked becomes a dependent variable of the choice of job characteristics. How endogenously-chosen variable changes affect exogenous changes is not represented. For instance the following is overseen if wage and job variables remained correlated, changes in exogenous income pose a direct effect on hours worked these changes may, however, trigger modifications on wage and job variables which may both affect hours worked indirectly and directly.

Parameter Estimation
Little has been done on the analysis of labor supply using labor supply models addressing job heterogeneity. More often than not, related studies were only used to understand areas like compensating wage differentials (Female Labor Supply A SurveyKillingsworth, Mark R.  Heckman, James J. 1986). The fact that the study of job variables implied no interest to most related works (provides limited information on preferences), it makes itself useful in understanding labor supply and how it is affected by heterogeneous jobs.

Job variables help provide estimation in compensating wage differential needed by a worker if one wished to change a certain job or particular job characteristics. The job heterogeneity model may be used to supply information as to what factors stimulate wage differential compensation. Wages and data on labor supply may be used to consistently estimate supply parameters and at the same time consider job variables of an individual prior to compensating wage differentials. Labor supply information within job variations is produced by similar preference structure. This structure dictates job choice and compensating wage differentials and thus, more data is acquired out of wage, labor supply and job choice analysis rather than wage analysis alone (Female Labor Supply A SurveyKillingsworth, Mark R.  Heckman, James J. 1986).

McKenzie (2006) has defined a monopolist company as one that is a sole producer of a particular commodity or service, is protected by market entry barriers and restricts its output in order to raise its prices above the competitive levels as a way of acquiring extra profits (p. 52).  Microsoft is widely regarded to be a monopolist company.  This is because Windows, a product of Microsoft accounts for almost ninety percent of the operating systems market (Eisenhach and Leonard, 1999). Figure 1 shows the market behavior of a monopoly.

Figure 2  Illustration of a Monopoly. Retrieved from Economics Help   httpwww.economicshelp.orgmicroessaysmarketsmonopoly-diagram.html
In a monopolist market, the monopolist company seeks to attain maximum profits by setting the output where MRMC.  This is at output Qm in relation to price Pm.  This is contrary to competitive markets where the price is lower and the output higher.

There have emerged concerns over Microsofts position in the technology industry and especially over its dominance in the operating systems market.  These concerns are not in regard to Microsofts successes but mainly on allegations that the company may be using its monopolistic nature to create obstacles to the entry of other complimenting actors into the market.

Two major accusations have thus been raised.  First, Microsoft is alleged to have inappropriately excluded its competitors in the Internet browser market by leveraging its operating systems monopoly.  It is also accused of attempting to disrupt the market for the Java programming language which has potential to significantly weaken the companys dominance in operating systems (p. 2).

The most brutal criticisms of Microsofts status have come from a number of the companys competitors in the market.  These are mainly Netscape, Sun, Oracle and Microsystems.  Netscape has brought forth the bulk of the accusations.  According to Gordon (2002), Netscape claims that Microsoft is seeking to undermine. through illegal means, its position as the lead provider of Internet browsers (p. 2).

Gordon explains that the introduction of the Netscape Navigator was bound to render Microsofts Operating System Windows- irrelevant.  The company claims that Microsoft responded by developing and commencing an aggressive promotion campaign of a rival Internet browser, Internet Explorer.
Another accusation came from Sun Microsystems, which challenged Microsoft by bringing Java, a new computer language, into the market.  It also proposed the network-computer option that counters Microsofts Personal Computer.  Microsoft reacted by coming up with upgrades to both its Intel processors and Windows and introducing the .Net Platform, thus challenging Sun Microsystems.
The concern was that the large number of Windows users would cause software developers to create software based applications on Microsoft Middleware.  These, as argued by Elkin- Koren and Salzberger (2004) means that Microsofts products would have increased attractiveness to consumers and thus result in a subsequent increase in the number of users.  This would make it very difficult for Sun Microsystems or any other competitor to compete with Microsoft (p. 46)

When analyzing these accusations, questions emerge regarding the economic implications of Microsofts monopoly in the industry.   Mankiw (2008) has noted that the fact that Microsoft has in effect weakened andor eliminated its close and strong competitors has given the company the power to influence the market price of its products (p. 311).

McKenzie (2006) has however argued that Microsoft included its Internet browser  Internet Explorer  at no added cost.  This goes against conventional monopoly theory that expects a monopolist company to increase the cost of its products above the cost of the competitive levels.  Microsoft did not increase the cost of its operating system and therefore should not be regarded as being a monopoly (p. 53).
It is widely agreed in economic circles that the existence of competition should ultimately benefit the consumers.  Cucinotta et al (2002) have noted that while Microsofts predatory control and pricing of its products may encourage a level of inefficient substitution in its competitors products, unsuccessful predation is in general of benefit to consumers.  This is because even though there may be harm done to the competitor, the consumer benefits from the lower pricing of products (p. 148).

In addition, McKenzie (2006) has pointed out that despite dominating discourse as a great and destructive monopoly, Microsoft continues to enjoy the support of consumers with the company continuing to reap large profit margins.  This is also contrary to what is expected in conventional monopoly theory.  It is expected that consumers would lose when a monopolist company (in this case Microsoft) restricts output below the competitive levels and continues to set prices above the competitive levels (p. 54).

It would have been expected that Microsofts consumers would have been hostile to the company and started supporting its accusers.  Figure 1 shows that the prices of word processing and spread sheet applications significantly reduced through the period in question.  While a monopoly is judged based on the prices it sets against its competitors and by its reducing its output, this graph makes it difficult to consider Microsoft a monopoly.  There is no evidence of price increase of its products and may simply mean that that consumers prefer Microsoft products to the rest.

It would also be expected that the actual or expected competitors of a monopolist company would be content with the dominant producers restrictions on sales to increase prices.  This is because they would then, based on the lower costs of their products, increase their sales and thus increase their profits.  Microsofts rivals were however the strongest supporters for efforts to barring the company from expanding its products.

According to McKenzie (2006), this suggests that Microsoft was acting competitively and not monopolistically in its actions (p. 54).  This raises the question of whether Microsofts actions are because of it being a monopoly or is the company simply an aggressive competitor.  McKenzie argues that if Microsoft were as strong a monopoly as it is claimed it would not be as aggressive as it is in its anti-competitor endeavors.  Monopolies, he argues, generally profit with more ease in less antagonistic environments (p. 60).

Elkin-Koren and Salzberger (2004) have pointed out that standard economic analysis lacks focus on technology and are therefore inappropriate in analyzing Microsofts market position.  This is because the company operates in an industry that is not limited to having a dominant power and its relation to output and price but also depends on technology which is dynamic.  Therefore, market dominance should not only be measured by the ability of a company like Microsoft to set the market price but also its ability to set the industrys technological standards.

Furthermore, they argue that anti-competitive conduct by a company should not be measured solely in terms of price and quantities but should also take into account the effect that anti-competitive conduct has on the nature of the technologies that become available (p. 47). In conclusion therefore, Microsofts endeavors to maintain its dominance in the operating systems market has without doubt resulted in the introduction of improved technologies that are of benefit the consumers. This makes it look like a monopoly but in a broad sense it is not.

Customs union is a trade community which is self-possessed of a free trade area with common peripheral levy that is to say that its is a group of countries that have come together and agreed to trade fairly among them with common external tariff. The participating countries set up common external policy of trade, but in some cases they use different import quotas (Timothy, 1999). This helps to avoid competition deficiency among them.
 
Some of the major reasons for establishing such customs is to increase economic efficiency and establish closer political cultural ties between the participant countries. Customs union is established through trade agreement it is a third stage to economic integration. Some of the major existing customs unions include Central American Common Market, Andean Community, East African Community, European Union Customs Union, Caribbean Community, and the Gulf Cooperation Council.
On the other hand, there exists the proposed customs unions include Economic Community of West African States (ECOWAS), Common Market for Eastern and Southern Africa (COMESA), Southern African Development community (SADC) and Arab Common Market (ACM) among others (Paul  Cooke, 2008). There are other types of customs union called the defunct customs. These are those that are outdated and invalid. They are not in functional state or they are not even registered in the trade agreement. Examples of these include Customs and Economic Union of Central Africa and the Customs Union between Lebanon and Syria.

For a country to be in a trade fair with another, there are some binding terms and conditions that it should accomplish. Like for instance, Australia should not seek membership of a proposed customs union if that union is trade diverting. This is because Australia does not meet the required conditions of joining such trade custom unions. Trade diverting customs unions showed that a country forming trade-diverting customs union with a partner country could increase welfare if substitution in consumption were allowed, that only happens where customs union import shifts from a lower cost third country to higher cost partner country.

This possibility has faced a lot of opposing ideas like the assumption that a fixed-coefficient variety in consumption and therefore concluded that a trade-diverting customs union necessarily would lower the welfare of the home country (Timothy, 1999). However, it is noted that the absence of the substitution in consumption is not a sufficient condition for a trade diverting customs union to be welfare reducing when the assumption made that the transformation curve is of a straight line nature. As shown below.

If the transformation is concave inwards, as shown below, and the assumptions of fixed coefficients in consumptions are retained, here the trade-diverting customs may be welfare improving for the home country. However, if substitution possibilities in both production and consumption were ruled out, the non discriminating tariff resulted in the same welfare level (Paul  Cooke, 2008).

When considering the case of Australia and its incapacity to seek membership in the proposed customs union, we find there are a lot of factors that made it to be incapacitated. Before Australia could sign any trade agreement, it had already declared its independence. Within a matter of some time, a monetary and customs union of 68 standing years had been dissolved, and the successor of the Australian state was printing his own currencies and implementing stringent controls over trade across the new borders of the republic of Australia (Timothy, 1999). These events confront the international economist with curiosity to know if the trade flows originally generated by the union were simply erased by its disintegration. Some economists also wanted to establish that did the break up engender patterns of trade distraction and trade reversion which proved to be the mirror image of the trade creation and trade diversion which had characterized its constitution.

This study uses the new estimates of the gravity model applied to trade flows in the 1920s to establish an answer to the question. The study has used new to estimates of the gravity model to analyze the effects on European trade patterns in the mid 1920s of the break up of the then Austro-Hungarian  empire and its customs union after World War I. The gravity equation has been found to explain up to 70 variance of the trade flows of the principal trading nations in 1924-1926 (Paul  Cooke, 2008). More over, ties between the members of Austro-Hungarian Empire remained stronger than any other commercial relationship in Europe. They were second only in intensity, given the economic and demographic factors, to those of the British Empire.

As almost all economists tend to reason out that free trade is desirable, they differ on how best to make the transition from tariffs and quotas to trade free. The three basic approaches to trade reform are unilateral, multilateral, and bilateral. Unilateral reforms are the only effective way to reduce domestic trade barriers (Timothy, 1999). However, bilateral and multilateral approaches dismantle trade barriers. But is spite of this, they still have an advantage over the unilateral reforms. First, the economic gains from the international trade are reinforced and enhanced when many countries agree to a mutual reduction in trade barriers.

Another advantage is that multilateral reductions and trade barriers may reduce political opposition to free trade in each of the countries involved. That is because groups that would oppose the trade reform might join the campaign for free trade if they se opportunities for exporting to other countries in the trade agreement (Paul  Cooke, 2008).

The best possible result of trade negotiations is a multilateral agreement. This is because it includes all major trading nations. Then the free trade is widened to allow many participants to achieve the greatest possible gains from the trade. The bilateral arrangements have also some advantages, like the promotion of greater trade among the members, and also hasten the global trade liberation if multilateral negotiations run into difficulties.

The most basic definition of a monopoly is a firm which exists alone in the entire industry. However, it depends on how narrowly the industry is defined  what matters is how much power the monopoly holds varying with the amount of substitutes available in the market by rival firms (Friedman, 2002).

Barriers to entry
The most evident property of a monopoly is the barriers to entry which are the blockages and obstacles for new firms for entering the industry. Barriers to entry include factors such as economies of scale this is the reduction of cost per unit as the level of production increases. Since monopolies are the only firms in their respective industries, they cover the entire market demand. To supply for that, the production level is huge which gives the firm an economies of scale unlike other new firms who produce only a small amount. Also, the cost of production for an established firm is always lower than a new firm because the new firm needs to make many expenses before it can settle down properly in the market.

Another barrier to entry is product differentiation which is a clear distinction of one companys product it is unique and the attributes are not shared by any other product produced by any other firm. Additionally, when only one company is supplying the market demand for a long time, the customers start trusting that brand and become loyal to it in a sense that they do not switch to other firms products. A new firms product does not have the experience in the market and does not have credibility because it is new. Moreover, the monopoly has an ownership of the majority of the key factors of production when it is the only firm producing such a huge quantity of output, monopolies not only purchase the factors of production but also the retail and wholesale outlets. Like this, neither do the new firms have enough factors of production, nor do they have retail outlets to sell their products at. Big monopolies are legally protected with copyrights and patents that give only their firm to practice in a particular market or area. A major barrier to entry for the firm is the threat of takeovers or mergers  the monopolies are so huge that they easily take over the small firm either by a pact or if they do not agree, by aggressive tactics (Sowell, 2004). Lastly, these big firms intimidate the small firms are heavy advertisements and price wars and by giving threats to the small new firms. Therefore, it becomes difficult for new firms to enter the market with one major monopoly operating in.

Causes of having monopolies
Due to less money being spent in price wars, advertisements and countering the rivals since there are none the monopolies save up a lot on cash which contributes to a rise in profits. Also, with a large output, economies of scale take place which reduces the cost of production for the firm. This can enable the firm to sell at a lower price, but monopolies do not do so. This extra profit that the monopolies earn can be used by these monopolies to invest in research and development and capital products. Normally, firms do not invest in research and development because even after spending so much money, it kind of stays useless  reason being, that all the other firms copy the new technique and again all the firms stand at the same level and the firm that spent money on research and development eventually has no edge over the others. Thus, firms wait for rivals to invest in research and development so that they can simply copy off the techniques rather than investing so much money in it themselves. But monopolies are the sole firm and only that firm can enjoy the results concluded from the research, so they invest in it. Also, investment in new capital goods such as assets and machinery improves the quality of work, production efficiency and the end result of the consumer good. Lastly, there is a healthy competition for corporate control competition improves the quality of the firm. This is not the competition in the goods market, but in the financial markets  there is always a competition for takeovers and buying of maximum shares in the firm if the firm becomes inefficient, therefore, there is a strong need for effective and proficient running of the firm.

Consequences of monopolies
Monopolies are chiefly considered to be against public interest. In perfect competition, the price is usually set equal to the marginal cost, so that the marginal revenue is also equal to price and perfect competition is achieved at MC  MR  P. Therefore, perfect competition signifies higher output at a lower price. But for monopolies, the price is way above the marginal cost because the companies can make supernormal profit (profit above zero profit zero profit is at MC  MR). Therefore, the public is paying a higher price than normally should be paid for the monopolies take advantage of being the only supplier. Especially, if the good is a necessity and the inelasticity is high, the monopolies take even more advantage of this situation. The firms are well-aware of the helplessness of the customers they will eventually come back to buy the monopoly firms product because of lack of choice and the need of fulfillment of wants. This leads to an extreme unequal distribution of income the rich gets richer and the poor gets poorer. The monopolies keep exploiting the customers and give no chance to the new comers so that the power in the hands of the monopoly can be neutralized. Lastly, these monopolies also practice illegal intimidation practices to scare away the new entrants which causes an increase in corruption along with a lack in competition. With no competition around, the monopoly firm becomes inefficient and the productivity falls with no decrease in prices  the inefficiency is extremely harmful for the industry as it collapses as a whole since that is the only firm in the entire market.

Import and Free Trade Areas
In case of a monopoly, it is difficult for a customer to not be exploited. Thus, they need, other companies to come into the market and provide the same product so the monopoly company has competition. The concept of competition brings in the idea of contestable markets a market where there is no cost on entries and exits and they can be freely and easily made. In an import oriented market, naturally, more and more foreign firms would want to enter the market. This would happen if the domestic customers would import products. In order for imported goods to enter the boundary of the country, a tariff or custom tax has to be paid. But in order to enhance import, a free trade area is usually formed  a deal between two or more companies to let import and export happen without any custom charges. In case this happens, the monopoly would break in the domestic market because the monopoly would be aware that the customers now have an alternative product and would not agree to whatever the monopoly does, as they are no more the sole suppliers of the product. When there is competition, there is a threat to the firm of their customers switching to other companies if they do not produce goods which are up to the mark. Therefore, this keeps the firm uptight and does not let it become incompetent. Due to price wars between companies, the customers benefit because both the companies try to sell at a lower price to gain a greater customer share. Therefore, the rich and the poor to quite an extent can afford the products. Profits are also distributed evenly in the industry instead of just one firm accumulating all the profit.

Monopolies, being the only firm in the market, can take advantage of this pact and make huge losses or be disadvantageous due to a lack of competition leading to inefficiency. Therefore, it is crucial to have pro-competition policies which, as a first step, reduce the barriers to entry usually set by monopolies. An ideal situation can be achieved in the industry and market if this methodology is followed.

According to Baumol (1972) an externality refers to the economic transactions which have an impact on a party that is not directly involved in the transaction. Externalities do not reflect the actual prices of products in the market. A positive externality creates advantages to the parties involved while negative externalities create negative impacts. In a market system, the producers and the consumers may or might not get the full benefits of an economic activity. The externalities can be positive or negative. Externalities create benefits and costs to the community (Tullock, 2005).

Government policies on tariff intervention may create external costs or benefits to the consumers. These are the externalities to the tariff intervention policies. The direct effect of tariff intervention policies are the changes in the amount of taxes paid by the manufacturers to the government (Tullock, 2005). When the tariff intervention policies increase the tariffs, the producers increase the amount of taxes paid to the treasury. When the policies are implemented to reduce the tariffs, the producers pay fewer taxes to the revenue authorities. The indirect effect of any increase or decrease in the tariffs is that the producers pass on the changes in the amount of taxes paid to the consumers. When the tariffs are increased, the producers provide higher prices for the products. When the government reduces the tariffs, the producers pay fewer amounts of taxes and this is reflected on the low prices imposed to the consumers (Weitzman, 1974).

Tariff intervention refers to the policies that the government uses to increase or decrease the tariffs to the exports or imports. The policies are established to promote trade within the domestic market or to improve the welfare of the consumers. When the government implements a tariff intervention policy which promotes domestic firms, competition decreases and the firms can offer higher prices in the domestic markets (Tullock, 2005). Such policies are implemented to protect the domestic or infant industries in the domestic market. Tariff intervention policies by the government to promote international trade are implemented to improve the welfare of the consumers. When the tariff policies are established to reduce the prices, the consumers purchase the commodities at a reduced price. These policies are also established to encourage the domestic firms to be efficient in their production processes (Weitzman, 1974).

External costs
Tariff intervention may be enacted to increase the tariffs on the goods imported to the country. This is an intervention to protect the domestic industries. The increase in tariffs protects the domestic firms from external competition and this causes an increase in the domestic prices. The international prices are usually lower than the domestic prices. When the economy is opened to the international trade, the domestic firms encounter competition and they are forced to reduce their prices. When tariffs are imposed, the social cost increases to the consumers due to an increase in the domestic prices of commodities. People purchase the goods at a higher price. The purchasing power of the consumers is decreased since the domestic prices are higher, that is, the consumers can purchase fewer commodities with a given amount of income. Consumers incur extra costs to purchase the commodities. Therefore, the quantity of products that can be purchased by a consumer at a given income level declines (Tullock, 2005).
Source Weitzman (1974).

From the diagram, the private cost indicates the position of the consumers before the tariff intervention. The consumers purchase Qr quantity of the commodities at price Pp. This creates an equilibrium. The consumers are satisfied by the price and quantities in the market. The demand and supply are balanced. When the tariff intervention policies are implemented, the suppliers raise the prices for the commodities. This reduces the purchasing power of the consumers and lesser quantity of the commodities is purchased. The social cost curve indicates the new supply position in the market. A new equilibrium is set at a higher level than the previous one. The difference in consumption is represented by the gap Qs-Qr. The price increase is represented by the gap Ps-Pp. The loss to the consumers due to the tariff intervention is measured by the price difference Pp-Ps. It can also be measured by the difference in quantity of commodities consumed Qr-Qs (Weitzman, 1974).

External benefits
When tariff intervention policies are implemented to encourage imports, more foreign commodities penetrate the domestic market at a lower price. The governments implement such policies to improve the welfare of the consumers as well as encourage the domestic firms to be efficient in their production. The international prices are usually lower than the domestic prices. When the government reduces the tariffs on the products traded in the international prices, the domestic prices will have to reduce. The consumer welfare is improved since the purchasing power is increased. The consumers can purchase more of the same commodities with a given amount of income. More quantities are purchased by the consumers (Tullock, 2005).

Source Weitzman (1974).
From the above diagram, reduction in the tariffs causes the domestic prices to decrease from Ps to Pp. The quantity consumed in the market is increased from QP to Qs. Before the tariff intervention, the consumers purchased Qp quantity of the commodities at price Pp. This created an equilibrium at the point actual equilibrium. When the government implements the tariff intervention policies, the prices decline from Ps to Pp. The consumers now consume Qs quantity of the commodity. This is an increase in the quantity consumed. The new equilibrium rises to ideal equilibrium. The gainsbenefits to the consumers due to the tariff intervention is measured to be the difference Ps-Pp in terms of price. In terms of quantity consumed, the benefits are measured by the difference Qs-Qp (Weitzman, 1974).

Conclusion
The tariff intervention policies should be established according to the prevailing economic circumstances. A government that is willing to promote the welfare of its people will implement tariff intervention policies which reduce the domestic prices. When the domestic firms experience competition from the international market, they will improve their production process. Efficiency in production will encourage production at low cost and provision of a variety of products in the market. A government which is willing to promote the success of the domestic industries will implement tariff intervention policies which will increase the domestic prices. When the domestic prices increases, the producers get higher returns from the sale of the commodities produced. The government should consider the effects of any policy being implemented. Tariff intervention policies will have direct impacts to the manufacturers but the actual burden of the policies will be upon the consumers. Consumers bear the tax burden and hence they are the most affected by the policy changes on tariffs.

Theorem

The relative factor price equalization theorem states that the relative prices for two identical factors (inputs) of production in the same market will eventually equal each other because of competition. The price for each factor need not become equal, but the relative factors will. Whichever factor receives the lowest price before two countries integrate into a single market will therefore tend to become more expensive relative to other factor of production in the economy. Factors which have the highest prices will tend to become cheaper.

Under the Heckscher-Ohlin model, the production of the good that uses the country s abundant resource would increase, increasing the demand for such resource while the production of the good that uses the country s scarce resource would decrease, releasing both scarce and abundant resources (Markusen et al, 1994). As the production of the using the abundant resource intensively increases, demand for that resource will increase. Now, the demand for the scarce resource will increase by a smaller amount. As the production of the good which uses the scarce resource intensively decreases, both abundant and scarce resources will be released, but relatively more of the scarce resource will be released than the abundant resource.

In the first diagram, labor is the abundant resource. Increasing the production of the good which uses labor will increase the demand for labor. At the same time, this will decrease the production of good which uses capital. However, the demand for capital will increase by a smaller amount because of the expanded production of labor-intensive goods (capital is also used in the production of these goods).

The Stolper-Samuelson Theorem states that a change in the price of a traded good results in a proportional change in the price of the factor used intensively in the production of that good (Helpman  Krugman, 1989). As a result, wages proportionally increase more than the increase in the relative price of the labor-intensive good. Under the Heckscher-Ohlin model, the price of the abundant factor will increase proportionally more than the increase in the price of the good which uses the abundant factor intensively. This results in an increase in the real wages of the labor-abundant country. The price of the scarce resource will decrease proportionally more than the decrease in the relative price of the good that uses the scarce resource intensively. This results in a decrease in the real price of the scarce resource and the rental price of capital in the capital-poor country.

It is possible for equalization not to occur even if the basic assumptions of the Heckscher-Ohlin model hold (due perhaps to unwarranted transportation costs, barriers to trade, and the existence of goods which are rarely traded). However, the relative factor price equalization theorem suggests an important policy alternative   allow free trade in outputs, specialize in labor-intensive production, and export labor indirectly in the form of labor-intensive goods (Helpman  Krugman, 1989).

How does relative factor price equalization occur Initially, relative factor prices differ across countries (diagram 3). Note that country A is labor abundant (LKb  LKa) while country B is capital-abundant (KLa  KLb). Note that the production isoquants of country A is oriented towards labor, while country B is towards capital.

The relative price of capital-intensive good in country A is less than the capital-intensive good in country B (PxPy)A  (PxPy)B. Hence, the real wage in A is less than the real wage in B. By transitivity, rental rate in A is greater than the rental rate in B.

After trade, the demand for labor in A will increase as production is oriented towards X, away from Y. The demand for capital in B will increase as production is oriented towards Y, away from X. In country A, real wage will increase while the rental rate will decrease. In country B, real wage will decrease while the rental rate will increase. As a result, (PxPy)A  (PxPy)B (terms of trade). The relative factor prices for each good tend to equalize (long-run). However, this equalization process is only possible under competition. Competition promotes factor mobility across countries and increased specialization.

How is factor price equalization related to income distribution An obvious solution would seem to be for the government to use taxes and subsidies to facilitate compensation. Note that factor price equalization always results to gains and losses in trade. For example the government could place taxes on those who would gain from free trade (or trade liberalization) and provide subsidies to those who would lose. However, if this were implemented in the context of many trade models, then the taxes and subsidies would change the production and consumption choices made in the economy and would act to reduce and eliminate the efficiency gains from free trade (Pareto optimality). The government taxes and subsidies, in this case, represent a policy-imposed distortion which, by itself, reduces aggregate economic efficiency. If the compensation package reduces efficiency more than the movement to free trade enhances efficiency then it is possible for the nation to be worse off in free trade when combined with a taxsubsidy redistribution scheme. The relative changes in taxsubsidy levels affect consumption and investment levels. Labor-abundant countries experience an increase in capital allocation while capital-abundant countries experience a surge in labor supply. Eventually, equilibrium is reached, and gains (or losses) are made. How is this related to efficiency Efficiency is attained because overall supply of labor is matched with overall supply of capital. In a sense, market players (countries) seek to fully utilize their abundant resource in order to attain a higher degree of efficiency. In the long-run, factor price equalization is beneficial for both capital-abundant and labor abundant countries (Bhagwati et al, 1998).

The simple way to eliminate this problem, conceptually, is to suggest that the redistribution take place as a lump-sum redistribution. Lump-sum redistribution is one that takes place after the free trade equilibrium is reached (after factor price equalization), in short, after all production and consumption decisions are made, but before the actual consumption takes place. Lump-sum redistributions are analogous to Robin Hood stealing from the rich and giving to the poor. As long as this redistribution takes place after the consumption choices have been made and without anyone expecting a redistribution to occur, then the aggregate efficiency improvements from free trade are still realized. Of course, although lump-sum redistributions are a clever conceptual or theoretical way to restore efficiency. Therefore, the gains from trade (as a result of relative factor price equalization) can be used to redistribute income.

The relative factor price equalization theorem has become the foundation of international trade. The reason is quite obvious. Relative factor price equalization is a precondition to global redistribution of wealth   indeed, a drive towards economic development.

Offer curves can be used to show the forces that determine the equilibrium world price ratio which is of critical importance in any discussion of international trade. An Offer curve lists the primary economic variables which influence fluctuations in equilibrium world price ratios.

In general, an offer curve shows the quantity of one good that an agent will export for each quantity of another good that it imports (Helman  Krugman, 1989, p. 85). The Offer Curve is essentially derived from the country s PPF. Suppose that there is a country named A which enjoys both goods X and Y. The country is better at producing X, but wants to consume both goods. Now, at point C, the country is in autarky. The country can produce two units of Y for four units of X.

As trade begins with another country, A will start to specialize in the production of X. At point B, it can trade with another country and consume at point S. When full specialization occurs, country A produces at point A and consumes at point T (note that this is a higher indifference curve). In effect, the price has been reduced to one X for one Y. The economy is in the state of equilibrium.

There are important points to remember. If two large countries are trading, then the terms of trade are determined by each country s willingness to trade at a particular price ratio. If a country increases demand for imports, there is always an accompanied increase in willingness to supply exports to purchase those imports. Therefore, an increase in the demand for imports, or an increase in the supply of exports can be summarized as an increase in a country s willingness to trade. The effects of shifts in a country s willingness to trade depend on the import-demand elasticity of the partner country (Markusen et al, 1994). Greater demand for a country s exports can lead to a decrease in exports if the exporting country has inelastic demand for the partner country s imports. Growth that leads to a greater willingness to trade can generally lead to a deterioration or decrease in the country s terms of trade   if the partner country has inelastic demand for imports from the growing country. Therefore one country s terms of trade is the inverse of the partner country s terms of trade.

Equilibrium is found at the relative price for the two goods where each is willing to purchase what the other country wants to sell. If a country s productive capacity (PPF) or its preference changes, it become more or less willing to trade at all price ratios. Now, the slope of the offer curve reflects the elasticity demand for imports (see the diagram).

Note that the slope of the offer curve is less than 1. The implication if a country faces inelastic demand for its exports, then the country can lose access to imports from growth. Suppose that a country exports wheat. Now, the demand for wheat is inelastic. The country s productive capacity increases   that now, it produces more wheat. Instead of earning more revenue, the terms of trade deteriorate, and the country can buy fewer imports than before it can increase its output of wheat. Hence, an increase in the world price of, say, good X leads country A to buy more imports from country B, but uses fewer exports to purchase the imports. Country B faces inelastic demand for good Y. There is another possible scenario. Country B becomes more willing to trade through growth, but the effect is to lower its ability to import X, even though it is exporting more of good Y to A.

In general, the offer curve shows the demand-supply dynamics of economic participants, as it relates to international trade. As shown earlier, economic factors play an important role in determining world price ratios. Some of the economic factors are relative price ratios, expansioncontraction of production possibilities frontier, preference changes, and demand elasticity. The offer curve aggregates these factors into a single frame of analysis. Tariff rates and subsidies are generally determined by offer curves.

In general, tariffs and subsidies drive a wedge between the prices at which goods are traded internationally and the prices at which they are traded within a country. The terms of trade are intended to measure the ratio at which countries exchange goods. The terms of trade, as determined by the offer curve, correspond to external not internal prices. When analyzing the effects of a tariff or export subsidy supply and demand are deemed functions of external prices.

An analysis of offer curves is derived from the nation s production frontiers and indifference maps. In general equilibrium analysis, all market are considered, not just, say, for commodity X. This is very important because changes in the market for commodity X affect other markets and give rise to important influence on the market for commodity X itself. On the other hand, partial equilibrium analysis only uses demand and supply curves. It does not consider the influence and the relations which exist between the market for commodity X and the market for all other commodities in the economy.

Empirically, how do offer curves show the forces which determine world equilibrium price ratios In developing countries, price volatility is a common phenomenon. If general prices are plotted in a modified offer curve, then variable price wedges are common (Markusen et al, 1994). Now, if both importers and exporters agree on a target price and if the industrialized consuming countries are willing to provide initial financing, the stabilization fund purchases and restores the commodity whenever the market price falls below the target, thereby pushing it back. When market prices rise above the target, stocks are accumulated, pushing the price down. In a sense, analysis of offer curves provides concrete solutions for stabilizing world price ratios.

The offer curve indirectly shows the degree of export income volatility. The ability of countries to maintain their standard of living suffers when earning falls. Countries are likely to reduce their investment incomes and foreign earnings decline, which adversely affect their long-run growth (Bhagwati et al, 1998, p. 251). As economists argue, a long term answer to the problem of revenue volatility is product diversification. Countries that develop new or non-traditional export markets benefit from the fact that prices in these markets are not likely to change in the same direction all the time and the elasticity of demand for the individual goods is likely to be larger for a new entrant who accounts for a small share of the market.

In sum, the forces which determine world price ratios   earnings volatility, aggregate supply and demand elasticity, price volatility, and investment level   are determined by the use of offer curves.

The most common imperfect market structures are monopolies and oligopolies. A Monopoly is a market situation where a single seller exists and has complete control over an industry (Cerrington 1999). In the US, there a quite a number of monopolies in the industry like Apple (iTunes). There are two kinds of monopolies monopoly and pure monopoly. Both have similarities overall but the general distinction would be a pure monopoly refers to market for a good that has no good substitutes. For example, a single rail transit in a city may be considered a monopolist in the sense that it is the sole provider of light railway transport services. However, with the presence of buses and taxi cabs playing the same routes, it cannot be considered a pure monopolist. There are several misconceptions about monopolies that must at once be rectified. First, being a monopolist doesnt ensure the firm an instant profit. There are instances that a monopolists costs are so high and the market size is very small. Second, it is no true that the firm can impose any price it wants. The maximum price that a monopolist can charge is dictated by the market demand thee monopoly faces. Lastly, a monopolist cannot maximise profit at the inelastic region of the market demand curve (Portbar et al. 2008).

On the other hand, an Oligopoly is a market structure with few sellers. There are two types of oligopolies pure and differentiated. Pure oligopolies sell homogeneous products and there are little perceived differences between the products (Gromsci 1998). An example of this would be the cement industry. In differentiated oligopolies, firms sell products that vary in quality. The automotive industry and the computer industry are good examples. These examples showcase differences in product quality, size shape, performance, power, speed, and many more. Unlike monopolies, oligopolies can also be classified according to the marketing strategies. This is not seen in monopolies since there is only a single producer present. In oligopolies, firms may either collude or act independently. Oligopolies maximize their profits by getting their marginal revenue to equal with their marginal costs. Furthermore, Oligopolies also depend on other sellers wit regards to their pricing. This is called collusion. An example of an organization of colluding firms is OPEC. They control the world oil prices.

Question 1
Age-earnings data show that
a. Differences in earnings by education level disappear for workers age 55 and over
b. Mens earnings increase with educational level but not womens earnings
c. Earnings rise with factors such as family background and personal drive, but not   education level
d. Higher educational levels are consistently associated with higher earnings

Question 2
At the profit maximizing level of employment for a monopsonist
a. The wage exceeds the marginal wage cost
b. Marginal revenue product equals the wage
c. The wage is less than marginal wage cost
d. Marginal product equals marginal revenue product

Question 3
Following table that shows the short-run production relationship and the product demand schedule for a firm.

Labor   output   output price
1    10 20
2    15 19
3    19 18
4    22 17
5    24 16
6    25 15

What is the marginal revenue product of the third worker
a. 18
b. 57
c. 72
d. 342

Question 4
For a firm hiring labor and selling its output in perfectly competitive markets
a. PL  MWC and VMP  MRP
b. PL  MWC and VMP  MRP
c. PL  MWC and VMP  MRP
d. PL  MWC and VMP  MRP

Question 5
Assume that the labor market is perfectly competitive.
 Labor   output   price
0    0 2.20
1    15 2.00
2    29 1.80
3    42 1.60
4    54 1.40
5    65 1.20

Rather than the product demand schedule shown in the table, suppose this firm sold its output competitively for a price of 2.00. In this case, how many workers will this profit-maximizing firm choose to employ at a wage of 13.20
a. 2
b. 3.
c. 4
d. 5

Question 6
Which of the following best exemplifies the Becker income effect An increase in the market wage leads a household to
a. Substitute time for goods in the production of commodities
b. Consume fewer time-intensive commodities and more goods-intensive commodities
c. Consume more commodities
d. Have fewer children

Question 7 short answer
One way of aiding low income families is to increase the minimum wage. An alternative is to provide a direct grant of nonlabor income. Compare the impact of these two options on work incentive. (hint you have use the substitution and income effects)
The increase will lead to a substitution effect this is because an increase in the incentives will enable the family have enough time to work and reduces the leisure time.

Question 8
A monopsonists marginal wage cost curve is positively sloped because
a. It discriminates by paying each worker a different wage according to his or her opportunity cost

b. It must charge a lower price for each additional unit of output, and it must charge this lower price for all units sold

c. It pays its workers lower wages, so that the supply of labor to the market is restricted

d. It must pay a higher wage to attract additional workers and it must pay this higher wage to all workers

Question 9
(World of Work 1-1) Nobel Laureate Gary Beckers basic professional contribution is his
a. Application of traditional theories of anthropology to labor markets
b. Application of the economic perspective to law, sociology, demographics, and anthropology
c. Statistical verification of race and gender discrimination
d. Explanation of the limitations of the economic perspective in explaining labor markets

Question 10
 Labor economics is studied as a distinct subfield of economics because
a. The bulk of national income is received by labor
b. The concepts of supply and demand must be revised somewhat when applied to labor markets
c. Labor economics can be used to analyze major socioeconomic trends such as the surge in the number of women workers
d. All of the above

Question 11
The long-run labor demand curve incorporates
a. The substitution effect only
b. The output effect only
c. Neither the substitution effect nor the output effect
d. Both the substitution effect and the output effect

Question 12
In a perfectly competitive environment, the height of the market labor supply curve at any given number of labor hours indicates
a. The total cost of employing that number of hours in the given occupation
b. The marginal cost of employing the first hour of labor
c. The value of the alternative activity in which the marginal hour might otherwise be used
d. The maximum wage employers would be willing to pay to attract additional labor

 Question 13
 Allocative inefficiency in a labor market may be caused by
a. Monopoly power in the product market
b. Monoposony power in the labor market
c. Both a. and b. are correct
d. Neither a. nor b. are correct

Question 14
As distinct from product market transactions, labor market transactions are unique in that
a. To the seller, the non-monetary characteristics of the sale can be as important as the price
b. Labor demand curves slope upward
c. The price of labor is not determined by supply and demand factors
d. They are less complex

Question 15
Which of the following is a true statement
a. Monopolists employ too many labor resources, because the value of the marginal product exceeds the marginal opportunity cost of labor

b. For a monopolist, the marginal revenue product of labor exceeds marginal wage at the profit maximizing level of employment

c. Monopolists pay a lower wage than competitors for the same type of labor

d.The monopolists demand for labor curve is less elastic than if it were a competitor in the sale of its output

 Question 16
Compared to an otherwise identical competitive firm, a firm with monopoly power will hire
a. Fewer workers, reflecting its decision to produce less output
b. More workers because the higher price charged by the monopoly raises its MRP
c. Fewer workers because workers are less productive in a monopoly setting
d. More workers because monopolies have higher profits and can pay higher wages

Question 17
Assume that skilled labor and energy are substitutes in production. An increase in energy prices is then predicted to
a. Unambiguously increase the demand for skilled labor
b. Unambiguously decrease the demand for skilled labor
c. increase the demand for skilled labor if the output effect outweighs the substitution effect
d. Decrease the demand for skilled labor if the output effect outweighs the substitution effect

Question 18
Because resources are scarce relative to human wants, economics is best described as
a. The science of allocating productive resources fairly
b. A science of choice
c. The science of allocating goods and services fairly
d. The set of natural laws that govern human behavior in the face of adverse conditions

Question 19
Human capital investment consists of
a. Any activity that enhances the quality of labor
b. Expenditures for formal schooling only
c. Expenditures for on-the-job training only
d. Any activity that leads to the substitution of physical capital for labor

Question 20
There will be a shortage of labor in a particular market if
a. Labor supply increases and demand decreases
b. The current wage is above the wage that would clear the market
c. There is a decrease in the price of a substitute resource
d. The current wage is below the wage that would clear the market

Question 21
Following diagram of a perfectly competitive labor market
 
For the supply and demand curves in the diagram, the level of employment will be highest at
a. Wage rate W1
b. Wage rate W2
c. A wage rate higher than W1
d. A wage rate lower than W2

Question 22
Which one of the following circumstances would most likely lead to increased investment in education by women
a. An increase in the likelihood of interrupted labor market careers
b. Improved employment opportunities for women
c. Higher discount rates for women than men
d. Persistent discrimination against women

Question 23
Which of the following would unambiguously predict a decrease in desired hours of work
a. The substitution effect of a wage decrease
b. The income effect of a wage decrease
c. A wage increase
d. The substitution effect of a decline in income tax rates

Question 24
 
If this persons wage rate falls as illustrated in the diagram, then
a. The substitution effect is stronger than the income effect
b. The income effect is stronger than the substitution effect
c. This persons non-wage income will fall as well
d. The substitution effect causes desired work hours to increase

Question 25
Assume that the labor market is perfectly competitive.
 
Compared to a firm facing D1, a firm facing demand schedule D2 but paying the same wage will hire
 a. The same number of workers, since total product is the same in both instances
 b. Fewer workers, since product price declines as output increases
 c. More workers, since product price declines as output increases
 d. More information is required

Question 26
 The slope of a standard budget constraint reflects
a. A diminishing marginal rate of substitution of leisure for income
b. An increasing marginal rate of substitution of leisure for income
c. A constant marginal rate of substitution of leisure for income
d. The wage rate

Question 27
The bulk of national income flows to
a. Land owners in the form of rent
b. Capital owners in the form of interest
c. Capital owners in the form of profit
d. Workers in the form of wages and salaries

Question 28
Since the end of World War II, the average weekly hours of work in manufacturing has
a. Been steady, in part due to increased education
b. Been steady, in part due to lower tax rates
c. Fallen steadily
d. Increased steadily

Question 29
Compared to basic work-leisure choice model, Beckers model of time allocation
a. Considers the week rather than the day as the basic unit of time
b. Considers the household rather than the individual as the basic decision-making unit
c. Assumes that goods and services take no time to consume
d. Considers time spent in household work as work time rather than leisure time

Question 30
All else equal, the imperfectly competitive sellers labor demand curve is
a. Greater than that of a perfectly competitive seller
b. More elastic than that of a perfectly competitive seller
c. Less elastic than that of a perfectly competitive seller
d. The same as than that of a perfectly competitive seller

Question 31
 A competitive firm will never choose to operate in stage(s)
a. I or II
b. I or III
c. II or III
d. III only

Question 32
Which of the following can be predicted to increase the demand for labor
a. An increase in the price of a gross substitute for labor
b. A decrease in the price of a pure complement to labor
c. A decrease in product demand
d. all of the above

Question 33
 Which one of the following will tend to increase the likelihood of participation in the labor force for a current non-participant
a. A decrease in the spouses wage
b. An increase in the spouses wage
c. An increase in family size
d. Falling productivity in household production of commodities

Question 34
Suppose that, as a result of an increase in the market supply of labor, the wage rate has fallen 10. After adjusting its employment levels, a firm finds its total wage bill has decreased. This occurrence indicates that the firms labor demand
a. Is inelastic over this range of wages
b. Is elastic over this range of wages
c. Is unit elastic over this range of wages
d. Was inelastic at the old wage, but is elastic at the new, lower wage

Question 35
An increase in the wage rate will increase desired hours of work if
a. The income effect and substitution effect cancel one another
b. The income effect dominates the substitution effect
c. The substitution effect dominates the income effect
d. Accompanied by an increase in non-wage income

Question 36
 INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET Suppose workers in labor market X are qualified to work in an alternative competitive labor market Y, and vice versa. An increase in the demand for labor in market Y will
Answer  INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET
 HTMLCONTROL Forms.HTMLOption.1

Increase labor supply in X and drive its wage down

 HTMLCONTROL Forms.HTMLOption.1

Decrease labor supply in X and drive its wage up

 HTMLCONTROL Forms.HTMLOption.1

Reduce labor supply in Y and drive its wage down

 HTMLCONTROL Forms.HTMLOption.1

Have no impact at all in X

Question 37
 INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET Suppose a working mother is currently ineligible for any government assistance. If she were then to become eligible for an income maintenance program that incorporates both a basic benefit and a positive benefit-reduction rate

Answer  INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET
 HTMLCONTROL Forms.HTMLOption.1

Both the income and substitution effect will cause her to increase her work effort

 HTMLCONTROL Forms.HTMLOption.1

Both the income and substitution effect will cause her to decrease her work effort

 HTMLCONTROL Forms.HTMLOption.1

Her work effort will increase if the substitution effect is stronger than the income effect

 HTMLCONTROL Forms.HTMLOption.1

Her work effort will decrease if the substitution effect is stronger than the income effect

 HTMLCONTROL Forms.HTMLOption.1

Questions 49 and 50 are based on the following information Assume under an income maintenance program that the basic benefit (income guarantee) is 9000 and the benefit-reduction rate is 50

Question 38  short answer
 INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET Floyd is now working in a job that pays 8000 per year. he is contemplating a one year automobile mechanics course that cost 1000 for book and tuition. Floyd estimates that the course will increase his income to 13000 in each year of the 3 years following completion of the course. At the end of those 3 years. If current interest rate is 10 is it economically rational for Floyd to enroll in the course

Yes. There will be n increase in his income. The NPV of the amount to be earned is, 5000 (1.11)  5000 (1.12)  1000 5000 4545  4132  1000 7677. Hence it is economical since there will be an increase in the income by 7677.

Question 39
 INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET The three basic characteristics of the economic perspective are
Answer  INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET
 HTMLCONTROL Forms.HTMLOption.1

Relative scarcity, purposeful behavior, and adaptability

 HTMLCONTROL Forms.HTMLOption.1

Supply, demand, and equilibrium

 HTMLCONTROL Forms.HTMLOption.1

Description, institutions, and facts

 HTMLCONTROL Forms.HTMLOption.1

Prices, quantities, and incomes

Question 40
 INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET (World of Work 3-7) Research by Hamermesh and Less suggests that
Answer  INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET
 HTMLCONTROL Forms.HTMLOption.1

High income earners would be happier if they earned less

 HTMLCONTROL Forms.HTMLOption.1

Less than 10 of U.S. married couples report feeling stressed for time

 HTMLCONTROL Forms.HTMLOption.1

Although Germans work fewer hours than the Japanese, they report more time stress

 HTMLCONTROL Forms.HTMLOption.1

All else constant, higher earnings lead to greater time stress

Question 41
 INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET Which of the following best describes the substitution effect of a wage increase
Answer  INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET
 HTMLCONTROL Forms.HTMLOption.1

The firms marginal cost increases, the firm desires to produce less output, and therefore less labor is required

 HTMLCONTROL Forms.HTMLOption.1

The cost of labor is relatively higher causing the firm to use relatively less labor

 HTMLCONTROL Forms.HTMLOption.1

The firms labor demand curve becomes less elastic, causing it to employ less labor

 HTMLCONTROL Forms.HTMLOption.1

The firms labor demand curve becomes more elastic, causing it to employ less labor

Question 42
 INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET In the context of the basic work-leisure model, work is defined as
Answer  INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET
 HTMLCONTROL Forms.HTMLOption.1

Time devoted to a paying job or household work

 HTMLCONTROL Forms.HTMLOption.1

Time devoted to a paying job

 HTMLCONTROL Forms.HTMLOption.1

Time devoted to any undesirable activity

 HTMLCONTROL Forms.HTMLOption.1

All time not devoted to rest and relaxation

Question 43
 INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET The old view of labor economics stresses _____ while the new view focuses upon _____.
Answer  INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET
 HTMLCONTROL Forms.HTMLOption.1

Analysis  markets

 HTMLCONTROL Forms.HTMLOption.1

Description analysis

 HTMLCONTROL Forms.HTMLOption.1

Description institutions

 HTMLCONTROL Forms.HTMLOption.1

Institutions description

Question 44
 INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET At the profit maximizing level of employment for a monopolist
Answer  INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET
 HTMLCONTROL Forms.HTMLOption.1

Marginal revenue product equals the value of marginal product

 HTMLCONTROL Forms.HTMLOption.1

Marginal revenue product exceeds the value of marginal product

 HTMLCONTROL Forms.HTMLOption.1

Value of marginal product equals the marginal wage cost

 HTMLCONTROL Forms.HTMLOption.1

Marginal revenue product is less than the value of marginal product

Question 45
 INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET Which of the following best describes the output effect of a wage increase
Answer  INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET
 HTMLCONTROL Forms.HTMLOption.1

The firms marginal cost increases, the firm desires to produce less output, and therefore less labor is required

 HTMLCONTROL Forms.HTMLOption.1

The cost of labor is relatively higher causing the firm to use relatively less labor

 HTMLCONTROL Forms.HTMLOption.1

The firms marginal cost falls, the firm desires to produce more output, and therefore more labor is required

 HTMLCONTROL Forms.HTMLOption.1

The firms labor demand curve becomes more inelastic, causing it to employ less labor

Question 46
 INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET In Beckers model of time allocation, the difference between goods and commodities is that commodities are produced
Answer  INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET
 HTMLCONTROL Forms.HTMLOption.1

In markets whereas goods are produced in households

 HTMLCONTROL Forms.HTMLOption.1

Only with housework

 HTMLCONTROL Forms.HTMLOption.1

By combining goods with time

 HTMLCONTROL Forms.HTMLOption.1

In the market, whereas goods are produced in the home

Question 47
 INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET Which of the following actions might a union use to try to restrict the growth of labor supply
Answer  INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET
 HTMLCONTROL Forms.HTMLOption.1

Increase product demand

 HTMLCONTROL Forms.HTMLOption.1

Reduce the number of qualified workers

 HTMLCONTROL Forms.HTMLOption.1

Enhance worker productivity

 HTMLCONTROL Forms.HTMLOption.1

Reduce the wage for nonunion labor

Question 48
INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET  INCLUDEPICTURE httpbb.wpunj.educourses1201010-ECON340-60ppg1225760385437061image001.png  MERGEFORMATINET According to human capital theory, areas 1, 2, and 3 represent respectively
Answer  INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET
 HTMLCONTROL Forms.HTMLOption.1

Indirect costs, direct costs, and incremental earnings

 HTMLCONTROL Forms.HTMLOption.1

Direct costs, indirect costs, and incremental earnings

 HTMLCONTROL Forms.HTMLOption.1

Indirect costs, direct costs, and total earnings

 HTMLCONTROL Forms.HTMLOption.1

Direct costs, indirect costs, and total earnings

Question 49
 INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET At the optimal amount of education, the internal rate of return on education is
Answer  INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET
 HTMLCONTROL Forms.HTMLOption.1

Maximized

 HTMLCONTROL Forms.HTMLOption.1

Higher than the market rate of interest

 HTMLCONTROL Forms.HTMLOption.1

Lower than the market rate of interest

 HTMLCONTROL Forms.HTMLOption.1

Equal to the market rate of interest

Question 50
The long-run response to a drop in the wage exceeds the short-run response for all of the following reasons except
Answer  INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif  MERGEFORMATINET
 HTMLCONTROL Forms.HTMLOption.1

It is more difficult to substitute capital for labor in the long run than the short run

 HTMLCONTROL Forms.HTMLOption.1

An increase in labor makes capital more productive, leading to more capital and therefore higher labor productivity

 HTMLCONTROL Forms.HTMLOption.1

The demand for the firms output is more elastic in the long run

 HTMLCONTROL Forms.HTMLOption.1

Technology may change in the long run.