Deck 15: Wage Rates in Competitive Labor Markets

Question 1

If MPP is decreasing, total output must be decreasing.

Answer 1

False

Question 2

If total product is rising as more workers are hired, MPP must be positive.

Answer 2

True

Question 3

MPP could never be negative.

Answer 3

False

Question 4

If demand for the finished good increases, the demand for the type of labor producing this good will also increase.

Question 5

If the wage rate is fixed at a certain level, then MLC is equal to that wage rate.

Question 6

A change in the price of a good will shift the demand for labor producing that good.

Question 7

A change in technology would affect MRP by its effect on MR.

Question 8

Wage differentials between industries can be affected by productivity differences.

Question 9

Less restrictive immigration policies would shift the labor demand to the right.

Question 10

Wage disparities among countries may result from open border policies.

Question 11

Technological improvement (e.g., better capital equipment) will result in a leftward shift of the marginal revenue product of labor.

Question 12

If Sam's manufacturing plant is in a perfectly competitive labor market where the current wage is $14 per hour, his firm can expect to drive up wages if it expands its operations by 50%.

Question 13

Although the law of diminishing returns is widely accepted in economics, it also ensures that the marginal revenue product must be positive.

Question 14

The truth of the MPP=MRP condition has been implicitly accepted by most businesses while not explicitly recognizing its legitimacy.

Question 15

A profit-maximizing firm will employ labor up to the point where MRP = wage.

Question 16

The total physical product increases initially at an increasing rate, and then, because of the law of diminishing returns, at a decreasing rate.

Question 17

The supply curve of labor is upward sloping because the marginal revenue produced bylabor is greater than one.

Question 18

Both an increase in employment opportunities and an increase in immigration lead to ashift to the right in the supply curve for labor.

Question 19

Minimum wage laws are always beneficial to low-wage workers.

Question 20

Persistent wage differentials between people having different skills violate the W = MRP ethic associated with the perfectly competitive market for labor.

Question 21

The W = MRP ethic states that individuals are paid according to the value of their opportunity cost.

Question 22

Technological change that makes workers more productive should increase the demandfor labor.

Question 23

A firm's demand for labor depends only on the price of labor.

Question 24

Specialization of labor can result in output increasing at an increasing rate.

Question 25

When diminishing returns set in, total output begins to decrease.

Question 26

In a perfectly competitive labor market, the total labor cost curve is a straight line starting at the origin.

Question 27

A decrease in the price of a good will cause a decrease in the firm's demand for labor.

Question 28

If workers become more productive as a result of a new technology, the demand for these workers will decrease because the firm will not need to hire as many.

Question 29

If people work less as the wage rate increases, their labor supply curves are backward bending.

Question 30

When demand for labor is highly inelastic, many workers lose their jobs when the minimum wage is raised.

Question 31

Prolonged war on a country's home soil is likely to expand a country's labor supply.

Question 32

Competitive labor markets see firms acting as though the marginal labor cost is constant.

Question 33

Given free mobility of people, wage differentials will contribute to long-term wage disparities among regions.

Question 34

The backward bending supply curve for labor is

A) not valid for individuals
B) valid only for aggregate labor markets
C) the result of purchasing power effects that outweigh the relative price changes for leisure
D) has to do with lack of firm interest in high-cost labor
E) describes a relationship between population and labor quantities

Question 35

Sam's manufacturing plant recently decided to pay its workers 14% more than the current market wage for equivalent skills. Such a management decision can be due to

A) noncompetitive labor markets
B) labor surpluses
C) the need for better skills
D) efficiency wages
E) community desires

Question 36

Marginal physical product of labor measures the

A) quantity of output produced by hiring workers
B) change in output generated by hiring an additional worker
C) change in revenue generated by hiring an additional worker
D) change in cost generated by hiring one additional worker
E) change in labor productivity generated by a change in capital employed

Question 37

-In Exhibit O-1, the marginal physical product of the fourth laborer is

A) 80
B) 45
C) 35
D) 100
E) 20

Question 38

-In Exhibit O-1, diminishing returns set in when the ______ worker is hired.

A) 1st
B) 2nd
C) 3rd
D) 4th
E) 5th

Question 39

-In Exhibit O-1, if the product price is fixed at $5, the MRP of the fourth worker is

A) $35
B) $125
C) $25
D) $175
E) $100

Question 40

-In Exhibit O-1, if the product price is fixed at $8, the MRP of the second worker is

A) $25
B) $125
C) $200
D) $175
E) $45

Question 41

-In Exhibit O-1, if price is $8, the MRP of the fifth worker is

A) $50
B) $80
C) $10
D) $100
E) $160

Question 42

Which of the following is always wrong, regardless of what other information may be given to you?

A) Hiring a worker when her marginal physical product is decreasing.
B) Hiring a worker when her marginal physical product is positive.
C) Hiring a worker when her marginal physical product is increasing.
D) Hiring a worker when her marginal physical product is negative.
E) Hiring a worker when her MRP > W.

Question 43

The law of diminishing returns states that as more workers are hired, beyond some point,

A) total output will fall
B) total cost will fall
C) marginal physical product will fall
D) total cost will rise
E) total output will rise

Question 44

The law of diminishing returns means that

A) total output will increase, but at a diminishing rate
B) marginal product will increase, but at a diminishing rate
C) total cost will increase, but at a diminishing rate
D) total revenue will increase, but at an increasing rate
E) total output will decrease

Question 45

Marginal labor cost is defined as the addition to

A) output a firm would receive after hiring one more laborer
B) total cost from hiring one more laborer
C) revenue earned by selling one more unit of a good
D) revenue earned by hiring one more laborer
E) output received by spending one more dollar on labor

Question 46

Marginal labor cost is measured by

A) MR × price
B) MR × MC
C) change in TR / change in MPP
D) change in TC / change in labor hired
E) change in TC / change in MPP

Question 47

-In Exhibit O-2, the wage rate paid is

A) $5
B) $6
C) $10
D) $30
E) unable to be determined from this information

Question 48

-In Exhibit O-2, the marginal labor cost of hiring a worker is

A) $5
B) $6
C) $10
D) $30
E) unable to be determined from this information

Question 49

-In Exhibit O-2 and Exhibit O-3, using the data in Exhibit O-2, the labor supply curvefacing the firm in Exhibit O-3 would be shown in the graph labeled

A) I
B) II
C) III
D) IV
E) unable to be determined from this information

Question 50

-Refer to Exhibit O-4. The wage required to attract 6 hours of labor is ______ and thewage required to attract 8 hours of labor is _______.

A) $6; $8
B) $48; $96
C) $8; $48
D) $6; $48
E) $8; $12

Question 51

-In Exhibit O-4, the marginal labor cost of the eighth hour of labor is

A) $6
B) $12
C) $8
D) $26
E) $48

Question 52

-In Exhibit O -4, the marginal labor cost of the sixth hour of labor is

A) $6
B) $12
C) $8
D) $26
E) $18

Question 53

-In Exhibits O-4 and 0-3, using the data in Exhibit O-4, the labor supply curve in ExhibitO-3 would be shown in graph

A) I
B) II
C) III
D) IV
E) unable to be determined from this information

Question 54

If the wage rate is $5 per hour, regardless of how many laborers are employed, the

A) labor supply curve is horizontal
B) labor supply curve is upward sloping
C) MPP must be constant
D) labor supply will increase at an increasing rate
E) labor supply will increase at a decreasing rate

Question 55

If the wage rate is $5 per hour, regardless of how many laborers are employed, the

A) total labor cost curve is horizontal
B) total labor cost curve is upward sloping
C) MPP must be constant
D) total labor cost curve will increase at an increasing rate
E) total labor cost curve will increase at a decreasing rate

Question 56

If the wage rate is $5 per hour, regardless of how many laborers are employed, the wagerate equals the

A) MLC
B) MPP
C) MR
D) MRP
E) TLC

Question 57

If the wage is fixed at $8 per hour, the total labor cost of employing four workers for 8hours is

A) $8
B) $32
C) $64
D) $256
E) $2,048

Question 58

The optimal hiring rule is to keep hiring laborers until the ________ of the last laborerhired.

A) wage rate = MLC
B) wage rate = MPP
C) wage rate = MR
D) wage rate = MRP
E) wage rate = TLC

Question 59

-In Exhibit O-5 (on the following page), the wage rate is

A) $5
B) $10
C) $15
D) $20
E) $25

Question 60

If the price of the good increases,

A) MPP will increase
B) MLC will increase
C) MRP will increase
D) MPP will decrease
E) TLC will increase

Question 61

If the wage rate increases,

A) MPP will increase
B) MLC will increase
C) MRP will increase
D) MPP will decrease
E) TR will increase

Question 62

If the demand for a good increases, the

A) demand for labor producing the good will increase
B) demand for labor producing the good will decrease
C) marginal labor cost will increase
D) marginal labor cost will decrease
E) marginal physical product of labor will increase

Question 63

Which of the following can shift the labor demand curve to the left?

A) decrease in the price of the good
B) increase in the wage rate
C) decrease in the wage rate
D) increase in MPP
E) increase in labor productivity

Question 64

A new technology that increases labor productivity will shift the

A) demand curve for labor to the left
B) MLC curve to the left
C) MPP curve upward
D) MLC curve to the right
E) demand for the good to the right

Question 65

An upward-sloping supply curve of labor implies that

A) any quantity of workers can be hired at the same wage rate
B) a higher wage rate is required to attract more laborers
C) there is an excess supply of labor in the labor market
D) the total labor cost curve is horizontal
E) the marginal physical product curve of labor must also be upward sloping

Question 66

A horizontal supply curve of labor implies that

A) lower wages are required to attract more employees
B) higher wages are required to attract more employees
C) MPP is constant
D) any quantity of workers can be hired at the same wage
E) the total labor cost curve is horizontal

Question 67

Which of the following could cause the supply curve of labor to shift to the right?

A) an increase in wealth
B) a decrease in population
C) a decrease in wages
D) an increase in employment opportunities
E) an increase in the wage rate

Question 68

If the supply curve of labor shifts to the left, we know for certain that

A) technology has improved
B) a higher wage rate must be offered to employ the same number of workers that were employed before the shift in the curve occurred
C) any quantity of workers can be hired at the same wage
D) the MRP has decreased
E) the MRP has increased

Question 69

-In Exhibit O-8, if the wage rate is $12,

A) a labor shortage results
B) a labor surplus results
C) the wage rate is in equilibrium
D) a scarcity of workers results
E) an excess demand for workers results

Question 70

-In Exhibit O-8, if the wage rate is $8,

A) a labor shortage results
B) a labor surplus results
C) the wage rate is in equilibrium
D) too many workers are present
E) an excess supply of labor results

Question 71

If working people in the economy become wealthier,

A) the supply curve of labor will shift to the right
B) the demand curve for labor will shift to the right
C) the demand curve for labor will shift to the left
D) some people may choose to work longer hours
E) some people may choose more leisure and fewer work hours

Question 72

A backward-bending supply curve of labor implies that

A) if the wage rate offered keeps increasing, at some point, workers will work fewer hours in response to an increase in the wage rate
B) the firm can hire any quantity of workers it wishes provided it pays back workers for the lower wage rate it offered
C) at higher wage rates, workers will go back to work (overtime) during their off hours
D) income and work hours are regarded as back-to-back payments for labor
E) wage rates are not an important consideration in the work decision

Question 73

If MRP > MLC, the firm

A) is employing the optimal quantity of labor
B) should decrease the quantity of labor it employs
C) should lower the wage rate
D) should increase the quantity of labor it employs
E) should raise the wage rate

Question 74

If MRP < MLC, the firm

A) is employing the optimal quantity of workers
B) should decrease the quantity of labor it employs
C) should lower the wage rate
D) should increase the quantity of labor it employs
E) should raise the wage rate

Question 75

If MRP = MLC, the firm

A) is employing the optimal quantity of workers
B) should decrease the quantity of labor it employs
C) should lower the wage rate
D) should increase the quantity of labor it employs
E) should raise the wage rate

Question 76

The effect of imposing a minimum wage rate on the quantity of labor employed is

A) greater the less elastic is the demand for labor
B) greater the less elastic is the supply of labor
C) zero if the minimum wage rate is above the equilibrium wage rate
D) greater the more elastic is the demand for labor
E) greater the closer the minimum wage is to the equilibrium level

Question 77

When more workers are hired, the firm's output expands at an increasing rate only

A) when the law of diminishing returns is operative
B) under conditions of noncompeting labor markets
C) if each worker's MPP is positive
D) when technology is improved
E) when the gains from specialization of labor outweigh all other factors affecting labor productivity

Question 78

The change in total output when one more unit of a resource is employed is called

A) total revenue
B) marginal revenue product
C) marginal physical product
D) quantity supplied
E) wage rate

Question 79

Typically, division of labor and specialization result in

A) increases in labor productivity
B) decreases in the marginal physical product of labor
C) decreases in the marginal revenue product of labor
D) decreases in the total output produced by labor
E) decreases in efficiency because workers are laid off

Question 80

Marginal physical product of labor is

A) total output divided by total labor employed
B) total labor employed divided by total output
C) change in total output divided by the change in labor employed
D) change in labor employed divided by the change in total output
E) total revenue divided by total output