Английский язык экономика. Учебно-методическое пособие по научно-техническому переводу, аннотированию и реферированию

cause any given expansion will reduce prices by more, reducing the marginal benefit of hiring workers.

Exercises

Exercise 1. Suggest the Russian equivalents for the words and word-combinations given below.

Costly workers, labour-intensive techniques, cheap abundant labour, firm’s chosen output level, quantity of labour demanded, diminishing marginal productivity, extra hiring, inappropriate, unaffected, inelastic.

Exercise 2. Explain in English.

The marginal product of labour (MPL), the marginal revenue product of labour (MRPL), monopoly power, monopsony power, monopsonist.

Exercise 3. The table shows how words are formed around the verb to produce.

Use these words in the suitable blanks in the sentences below.

1.The company ... a new commodity every year.

2.The company’s newest ... is a special perfume .

3.The ... of plastic utensils met last year to discuss prices.

4.That plant is not so ... now as it was 5 years ago.

5.The ... of that factory has gone down over the last 3 years.

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6. The manager of the plant has decided that they must increase their

... of cars.

Exercise 4. Arrange the jumbled words into the right order

a)to economize / during / we / dry / have / on / the / season / water.

b)have / a / home / demand / for / created / computers / these / great / developments.

c)still / manual / building / labour / involves / roads.

d)factory / its / 30% / the / hopes / output / car / to increase / year / by / next.

Exercise 5. Describe the graph given in Fig. 5.

Exercise 6. Do the written translation of the passage.

“Since all firms in the industry ... firm’s individual labour demand curves”.

Exercise 7. Review questions.

1.Why is a firm’s output supply decision the same as its labour demand decision?

2.a) Why does the marginal product of labour eventually decline? b) Show in a diagram how a rise in a firm’s capital stock affects its

short-run demand for labour.

Exercise 8. Look through the text once more, find key-words in it and write an abstract of the text using the key-words.

Part 2. An insight into how economics applies to the real world

Higher Education Pays off

Nowadays most students must contribute to the cost of their higher education. What financial benefits are likely to accrue in the future? The table below shows the results of a major empirical study on determinants of people’s wages by the time they are 33 years old.

Degrees add a lot to future earning power, but the subject also matters. Economics students can expect to earn much more than history or languages students (Tab. 2).

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Assignments

1.Study this article.

Does it reflect personal characteristics such as education, job experience, gender?

Express your point of view.

2.Discuss in your group.

a)Suppose going to university adds nothing to productivity but reveals that you were simply born clever and determined. Would graduates earn more than non graduates? Would it matter if you studied philosophy or economics? What can be deduced from the fact that Arts graduates do earn less than economics graduates?

b)A film producer says that the industry is doomed because some film stars (e.g. Russell Crowe and Julia Roberts) are paid too much. Evaluate the argument.

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UNIT 5

Part 1. Text. Governing the Market

The invisible hand

Adam Smith suggested that a market economy is efficient ‘as if by an Invisible Hand’. Perfect competition may do the job. Each consumer buys goods until his marginal cost (the price of the good) equals the marginal benefit of the good to him. The demand curve shows how much consumers buy at each price. Thus at each quantity in Fig. 7 the demand curve DD is also the marginal benefit to consumers of getting that quantity of films.

Perfectly competitive producers equate rice to marginal cost. At each output in Fig. 7 the supply curve SS thus shows the marginal cost of making that amount of the good. At Q1 films, the marginal benefit to consumers is Р1, above the marginal cost to producers. Society should make more films than Q1. Where supply and demand intersect, the social marginal benefit P* of using resources to make films equals the social marginal cost P* of films. No free lunch is available by reallocating resources. The allocation is efficient.

For given tastes, inputs and technology, an allocation is efficient if no one can then be made better off without making at least one other person worse off.

Fig. 7. Competitive equilibrium and Pareto-efficiency

No government decided this. Each consumer and each firm pursued their self-interest, buying and selling what made sense to them. Prices co-

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ordinated their decisions. Because every buyer and seller faced the same price, marginal benefits equalled marginal costs. Society got the efficient quantity produced and consumed.

Even so, the resulting allocation may well be very unequal, as the talented are rewarded more highly than the disadvantaged. The Invisible Hand applies to efficiency but not to equity. Quite often, it does not deliver efficiency either.

Market failures

A distortion or market failure exists if society’s marginal cost of making a good does not equal society’s marginal benefit from consuming that good.

There are four principal sources of market failure.

Taxation

Governments levy taxes to finance public spending. A tax creates a gap between the price the buyer pays and the price the seller receives. If there is car tax of £2000, car buyers equate the marginal benefit of cars to the gross price, but car producers equate the marginal cost of cars to the lower net price received by producers. Hence the marginal cost of cars is £2000 less than the marginal benefit of cars. This is inefficient. Society should make more cars. Government spending is needed to offset other distortions in the market economy, and to redistribute income, but taxation itself usually creates a distortion.

Imperfect competition

Facing down-sloping demand curves, imperfect competitors set marginal cost equal to marginal revenue, which is less than the price they charge. Thus, price exceeds marginal cost, like a privately imposed tax. Again, such industries produce too little from the social viewpoint: in equilibrium, the marginal benefit of more output exceeds its marginal cost.

Externalities

Externalities are spillovers, such as pollution, noise and congestion. A person’s decision ignores her effect on other people. There is no market for externalities like noise, secondary cigarette smoke or induced congestion on roads. Without a market in noise, prices cannot equate the mar-

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ginal benefit of making a noise and the marginal cost of that noise to other people.

An externality arises if a production or consumption decision affects the physical production or consumption possibilities of other people.

A chemical firm pollutes a lake, imposing an extra production cost on anglers (fewer fish) or a consumption cost on swimmers (dirty water). The firm pollutes until the marginal benefit of polluting (a lower cost of making chemicals) equals its marginal cost of polluting, which is zero. It ignores the marginal cost its pollution imposes on anglers and swimmers.

Conversely, you paint your house but ignore the consumption benefit to your neighbours, who now live in a nicer street. You paint up to the point where your own marginal benefit equals your marginal cost, but society’s marginal benefit exceeds yours. There is too little house painting.

In both cases, the private costs or benefits differ from social costs or benefits. Fig. 8 shows the marginal private cost MPC of making chemicals.

Fig. 8. The social cost of a production externality

For simplicity, we assume it is constant. The marginal social cost MSC of chemical production is the marginal private cost plus the marginal externality from pollution at each output of chemicals. As chemical production rises, each extra unit of chemical output causes more pollution damage.

The curve DD shows the demand for chemicals. At the equilibrium output is Q, the marginal social cost MSC exceeds the marginal social benefit of chemicals (the private demand curve DD, since there are no consump-

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tion externalities). The output Q is inefficient. By reducing chemical production, society saves more in social cost than it loses in social benefit. Society could then make some people better off without making anyone worse off.

The efficient output is Q’, at which the marginal social benefit and cost of the last output unit are equal. By producing at the market equilibrium E, not the efficient point E’, society wastes the triangle E’EF, the excess of social cost over social benefit when output rises from Q’ to Q.

Production externalities make private and social cost diverge. Consumption externalities make private and social benefit diverge. Again, free market equilibrium is inefficient. Output is too low if externalities are beneficial, as with planting roses in your garden, but is too high if externalities are adverse, as with smoking in restaurants.

Property rights and externalities

Can we set up a market in pollution? By pricing pollution itself, people could trade it until private marginal costs and benefits were equal. With nobody now ignored, private and social costs or benefits are the same again. Notice, in passing, that this implies that the efficient quantity of pollution is not zero. Eliminating the last little bit has a huge marginal cost and only a small marginal benefit. It is not worth cutting back to zero.

Why don’t we have a market in pollution? Someone at your door says: ‘I am collecting money from people who hate factory smoke in their gardens. We’ll pay the factory to cut back. Will you contribute? I’m visiting 5000 houses nearby.’ Even though you hate smoke, you pretend not to care and do not contribute. If everybody else pays, the factory cuts back and you get the benefit. If nobody pays, your small payment makes little difference. Whatever others do, you don’t pay: you are a free rider. Everyone else reasons similarly. Nobody pays, even though you are all better off paying to get the smoke cut back.

A free rider, knowing he cannot be excluded from consuming a good, has no incentive to buy it.

Taxing externalities

Cigarette smokers cause bad consumption externalities for those nearby. Fig. 9 shows the supply curve SS of cigarette producers, which also shows marginal social cost. DD is the private demand curve, showing the marginal private benefit of cigarettes to smokers.

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Fig. 9. Taxes to offset externalities

The marginal social benefit DD’ of cigarette consumption is lower than DD. Free market equilibrium is at E, but the efficient point is E*. The government now levies a tax E*F per packet of cigarettes. With the tax-inclu- sive price on the vertical axis, the demand curve DD is unaffected, but the supply curve shifts up to SS’, which, subtracting the tax E*F from each

price, returns producers to the original supply curve SS.

A tax rate E*F leads to market equilibrium at F. The efficient quantity Q* is produced and consumed. Consumers pay P’and producers get P” after tax is deducted at E*F per unit. The tax rate E*F is exactly the marginal externality on the last unit when the efficient quantity Q* is produced. Consumers behave as if they took account of the externality, though they look only at the tax-inclusive price.

Taxes that offset externalities improve efficiency. The fact that alcohol and tobacco have harmful externalities is a reason to tax them heavily.

Public goods

Public goods are like a very strong externality. Most goods are private goods. The ice cream in your throat is now unavailable for eating by other people. Not so with public goods, such as clean air and national defence.

A public good is necessarily consumed in equal amounts by everyone. Public goods have this special feature in consumption, in whichever sector they are produced. If the Navy patrols coastal waters, your consump-

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tion of national defence does not affect our quantity of national defence. We get different amounts of utility from it if our tastes differ, but must all consume the same quantity. Nobody can be excluded from consuming a public good once it exists, and the act of consumption does not deplete the quantity left for other people. Public goods supplied in private markets are wide open to the free-rider problem. Since you get it, whether or not you pay for it, you never buy a public good that already exists. Private markets do not produce the efficient quantity. We need government intervention. The efficient quantity of a public good equates the marginal cost of making it to the marginal social benefit of having it, which is simply the sum of the marginal private benefit of each person consuming that quantity.

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Exercises

Exercise 1. Suggest the Russian equivalents for the words and word-combinations given below.

Gross price, net price, to redistribute, imperfect competitors, spillover, conversely, marginal externality, chemicals, triangle, to cut back, tax-in- clusive price, national defence, government intervention.

Exercise 2. Match the words with their definitions.

Exercise 3. Choose one of the words from Exercise 2 to make the sentences complete.

1.This is where our opinions ... from each other.

2.You can’t ... passing examinations and being intelligent.

3.He ... his travel expenses against tax.

4.The seamen’s strike has seriously ... the country’s stocks of food.

5.If you ... 10 from 30 you get 20.

6.Our meeting was appointed in the place where two roads ... .

7.Nothing could ... her to be disloyal to him.

8.Don’t ... your money on silly things; save it!

Exercise 4. Find in the text antonyms for the following words.

Consumer, to purify, to add, accumulation, to converge, favourable, equal, visible, success, perfect, public.

Exercise 5. Explain in English.

An efficient allocation, a distortion, an externality, a free rider, a public good, property rights.

Exercise 6. Increase your vocabulary.

bear market – рынок, на котором наблюдается тенденция к снижению курса;

bull market – рынок, на котором наблюдается тенденция к повышению курса;

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