Archive for April, 2016

Think About Earnings and Discrimination

April 24, 2016 Leave a comment

I recommend students take the time to write thoughtful answers to these questions in their class notebooks:

  1. Why do coal miners get paid more than other workers with similar education?
  2. In what sense is education a type of capital?
  3. How might education raise a worker’s wage without raising the worker’s productivity?
  4. What conditions lead to economic superstars? Would you expect to see superstars in dentistry? In music?
  5. Give three reasons a worker’s wage might be above the level that balances supply and demand.
  6. What difficulties arise in deciding whether a group of workers has a lower wage because of discrimination?
  7. Does the profit motive tend to make the practice of discrimination based on race more common or less common? How?
  8. Give an example of how discrimination might persist in a competitive market.
Categories: Microeconomics

Videos on Earnings and Discrimination

April 21, 2016 Leave a comment

Categories: Videos

Practice Problem on Markets for Factors of Production

April 11, 2016 Leave a comment
Workers Output MPL VMPL Wage

Marginal Profit




100 $1,000 $500 $500
2 80 $ 800



60 $500


4 280 $ 400


5 20 $500
  • What is the market price of the final good?
  • When does increasing marginal product occur?
  • If the firm hires two workers, how much do the two workers together produce?
  • What is the marginal product of the fourth worker?
  • What property is exemplified by the fact that the marginal product falls as the number of workers increases?
  • The fact that the production function exhibits diminishing marginal productivity implies that total production ______________ (decreases or increases?) beyond a certain level of output.
  • What is the marginal profit of the fourth worker?
  • What is the fourth worker’s contribution to total revenue?
  • To maximize its profit, how many workers will the firm hire?
  • To maximize its profit, the firm will hire workers as long as the value of the marginal product of labor equals or exceeds $___?
Categories: Microeconomics

Fun Theory, or “People Respond to Incentives”

April 10, 2016 Leave a comment

It’s a cool idea and upbeat video…but is it really any different from “people respond to incentives?”

Categories: Microeconomics, Videos

What Damage the U.S. Raising Tariffs on Chinese Products Will Do

April 9, 2016 Leave a comment

It would be bad for the U.S. and bad for China:

…the Chinese government’s response would probably be tariffs of its own on American goods and services rather than lowering barriers for American companies doing business in China. It moved quickly to retaliate for the tariff on Chinese tires with punitive duties on American products. Because the Chinese market has become critical for many American companies — whether Apple, Starbucks or Boeing — any steps taken by the Chinese government to curtail their ability to operate in China would be bad news for them.

This might be good for India, Vietnam, Bangladesh and other countries to which at least some of the production happening in China is likely to shift.

Categories: China, International Trade