Deck 13: Labor Markets, Poverty, and Income Distribution

Question 1

Espresso Yourself Coffee Shop hires workers in a competitive labor market to make coffee. The ingredients required to make each cup of coffee cost 50 cents. The coffee shop's hourly output of coffee varies with the number of workers hired, as shown in the table. Each cup of coffee sells for $2.00. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Number df } \\\text { wurkers }\end{array} & \begin{array} { c } \text { Caftee } \\\text { (cups/hour) }\end{array} \\\hline 0 & 0 \\\hline 1 & 25 \\\hline 2 & 45 \\\hline 3 & 60 \\\hline 4 & 70 \\\hline 5 & 75 \\\hline\end{array}$$  
The marginal product of the third worker is ________ than the marginal product of the second worker, implying that ________.

A)greater; diminishing returns are absent
B)less; diminishing returns are present
C)neither greater nor less; the third worker will be hired
D)less; the third worker will never be hired

Answer 1

less; diminishing returns are present

Question 2

In competitive labor markets, ________ demand labor and ________ supply labor.

A)firms; labor unions
B)labor unions; firms
C)workers; firms
D)firms; workers

Answer 2

firms; workers

Question 3

The additional output a firm gets from hiring an additional unit of labor is the

A)value of the marginal product of labor.
B)total product of labor.
C)marginal product of labor.
D)average product of labor.

Answer 3

marginal product of labor.

Question 4

Sam owns a candy factory and hires workers in a competitive labor market to pack cases of candy. The company's weekly output of cases of candy varies with the number of workers hired, as shown in the following table:  
$$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Number d } \\\text { warkers }\end{array} & \text { Cases/reek } \\\hline 0 & 0 \\\hline 1 & 160 \\\hline 2 & 310 \\\hline 3 & 450 \\\hline 4 & 580 \\\hline 5 & 700 \\\hline 6 & 810 \\\hline\end{array}$$  
The marginal product of the fourth worker is ________ cases per week.

A)110
B)130
C)140
D)145

Question 5

Suppose the MC Hammer Company produces hammers. The number of hammers it can produce each hour depends on the number of workers it hires, as shown in the accompanying table. In addition, each hammer can be sold for $2 more than the cost of the materials needed to produce it. $$\begin{array} { | c | c | } \hline \text { Number of warkers per hour } & \text { Number of humers per haur } \\\hline 0 & 0 \\\hline 1 & 20 \\\hline 2 & 36 \\\hline 3 & 48 \\\hline 4 & 56 \\\hline 5 & 60 \\\hline\end{array}$$  
If the hourly wage for people who make hammers is $17 per hour, then how many workers should the MC Hammer Company hire each hour?

A)1
B)2
C)3
D)4

Question 6

In a competitive labor market, if a firm pays a worker less than that worker's VMP, then in the long run:

A)the firm will earn positive economic profits.
B)competing firms will hire the worker away.
C)the worker will have no incentive to work hard.
D)the supply of workers will fall.

Question 7

Espresso Yourself Coffee Shop hires workers in a competitive labor market to make coffee. The ingredients required to make each cup of coffee cost 50 cents. The coffee shop's hourly output of coffee varies with the number of workers hired, as shown in the table. Each cup of coffee sells for $2.00.  
$$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Number df } \\\text { wurkers }\end{array} & \begin{array} { c } \text { Caftee } \\\text { (cups/hour) }\end{array} \\\hline 0 & 0 \\\hline 1 & 25 \\\hline 2 & 45 \\\hline 3 & 60 \\\hline 4 & 70 \\\hline 5 & 75 \\\hline\end{array}$$  
The value of marginal product of the first worker is ________ per hour.

A)$37.50
B)$25.00
C)$2.00
D)$1.50

Question 8

Espresso Yourself Coffee Shop hires workers in a competitive labor market to make coffee. The ingredients required to make each cup of coffee cost 50 cents. The coffee shop's hourly output of coffee varies with the number of workers hired, as shown in the table. Each cup of coffee sells for $2.00. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Number df } \\\text { wurkers }\end{array} & \begin{array} { c } \text { Caftee } \\\text { (cups/hour) }\end{array} \\\hline 0 & 0 \\\hline 1 & 25 \\\hline 2 & 45 \\\hline 3 & 60 \\\hline 4 & 70 \\\hline 5 & 75 \\\hline\end{array}$$  
The most the coffee shop would be willing pay the third worker is ________ per hour.

A)$60.00
B)$45.00
C)$22.50
D)$15.00

Question 9

Sam owns a candy factory and hires workers in a competitive labor market to pack cases of candy. The company's weekly output of cases of candy varies with the number of workers hired, as shown in the following table:  
$$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Number d } \\\text { warkers }\end{array} & \text { Cases/reek } \\\hline 0 & 0 \\\hline 1 & 160 \\\hline 2 & 310 \\\hline 3 & 450 \\\hline 4 & 580 \\\hline 5 & 700 \\\hline 6 & 810 \\\hline\end{array}$$  
If each case sells for $5 more than the cost of the materials used in producing it, and the competitive market wage is $625/week, then how many workers should Sam hire each week?

A)5
B)4
C)3
D)2

Question 10

Suppose the Tasty Taco Company produces tacos. The number of tacos it can produce each hour depends on the number of workers it hires, as shown in the accompanying table. In addition, each taco can be sold for 50 cents more than the cost of the ingredients needed to produce it.  
$$\begin{array} { | c | c | } \hline \text { Number af warkers per hour } & \text { Number of tacas per hour } \\\hline 0 & 0 \\\hline 1 & 25 \\\hline 2 & 45 \\\hline 3 & 60 \\\hline 4 & 70 \\\hline 5 & 75 \\\hline\end{array}$$  
If the hourly wage for people who make tacos is $8, then how many workers should the Tasty Taco Company hire each hour?

A)1
B)2
C)3
D)4

Question 11

Suppose the Fluffy Pillow Company produces pillows. The number of pillows it can produce each hour depends on the number of workers it hires, as shown in the accompanying table. In addition, each pillow can be sold for $2 more than the cost of the materials needed to produce it.  
$$\begin{array} { | c | c | } \hline \text { Number af warkers per haur } & \text { Number of pillavs per hour } \\\hline 0 & 0 \\\hline 1 & 24 \\\hline 2 & 42 \\\hline 3 & 54 \\\hline 4 & 60 \\\hline 5 & 61 \\\hline\end{array}$$  
What is the value of the marginal product of the 2nd worker hired each hour?

A)$36
B)$84
C)$16
D)$24

Question 12

Espresso Yourself Coffee Shop hires workers in a competitive labor market to make coffee. The ingredients required to make each cup of coffee cost 50 cents. The coffee shop's hourly output of coffee varies with the number of workers hired, as shown in the table. Each cup of coffee sells for $2.00. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Number df } \\\text { wurkers }\end{array} & \begin{array} { c } \text { Caftee } \\\text { (cups/hour) }\end{array} \\\hline 0 & 0 \\\hline 1 & 25 \\\hline 2 & 45 \\\hline 3 & 60 \\\hline 4 & 70 \\\hline 5 & 75 \\\hline\end{array}$$  
The dollar value to the coffee shop of hiring the fifth worker is ________ per hour.

A)$1.50
B)$2.00
C)$5.00
D)$7.50

Question 13

Suppose the Fluffy Pillow Company produces pillows. The number of pillows it can produce each hour depends on the number of workers it hires, as shown in the accompanying table. In addition, each pillow can be sold for $2 more than the cost of the materials needed to produce it.  
$$\begin{array} { | c | c | } \hline \text { Number af warkers per haur } & \text { Number of pillavs per hour } \\\hline 0 & 0 \\\hline 1 & 24 \\\hline 2 & 42 \\\hline 3 & 54 \\\hline 4 & 60 \\\hline 5 & 61 \\\hline\end{array}$$  
If the hourly wage for people who make pillows is $10, then how many workers should the Fluffy Pillow Company hire each hour?

A)1
B)2
C)3
D)4

Question 14

Espresso Yourself Coffee Shop hires workers in a competitive labor market to make coffee. The ingredients required to make each cup of coffee cost 50 cents. The coffee shop's hourly output of coffee varies with the number of workers hired, as shown in the table. Each cup of coffee sells for $2.00. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Number df } \\\text { wurkers }\end{array} & \begin{array} { c } \text { Caftee } \\\text { (cups/hour) }\end{array} \\\hline 0 & 0 \\\hline 1 & 25 \\\hline 2 & 45 \\\hline 3 & 60 \\\hline 4 & 70 \\\hline 5 & 75 \\\hline\end{array}$$  
The marginal product of the fourth worker is ________ cups of coffee per hour.

A)70
B)60
C)17.5
D)10

Question 15

The marginal product of the 14ᵗʰ worker is 8 and the firm sells its output for $4 per unit. If labor is the only variable cost, then the value of the 14ᵗʰ worker's marginal product is

A)$2.
B)$4.
C)$12.
D)$32.

Question 16

Sam owns a candy factory and hires workers in a competitive labor market to pack cases of candy. The company's weekly output of cases of candy varies with the number of workers hired, as shown in the following table:  
$$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Number d } \\\text { warkers }\end{array} & \text { Cases/reek } \\\hline 0 & 0 \\\hline 1 & 160 \\\hline 2 & 310 \\\hline 3 & 450 \\\hline 4 & 580 \\\hline 5 & 700 \\\hline 6 & 810 \\\hline\end{array}$$  
If each case sells for $5 more than the cost of the materials used in producing it, then the value of marginal product of the 2?? worker is ________ per week.

A)$150
B)$310
C)$315
D)$750

Question 17

The value of marginal product of labor equals the

A)marginal product of labor times the net price for which each unit of output sells.
B)total product of labor divided by the net price for which each unit of output sells.
C)marginal product of labor divided by the net price for which each unit of output sells.
D)average product of labor times the wage rate.

Question 18

Suppose the MC Hammer Company produces hammers. The number of hammers it can produce each hour depends on the number of workers it hires, as shown in the accompanying table. In addition, each hammer can be sold for $2 more than the cost of the materials needed to produce it. $$\begin{array} { | c | c | } \hline \text { Number of warkers per hour } & \text { Number of humers per haur } \\\hline 0 & 0 \\\hline 1 & 20 \\\hline 2 & 36 \\\hline 3 & 48 \\\hline 4 & 56 \\\hline 5 & 60 \\\hline\end{array}$$  
What is the value of the marginal product of the 2nd worker hired each hour?

A)$36
B)$72
C)$16
D)$32

Question 19

Sam owns a candy factory and hires workers in a competitive labor market to pack cases of candy. The company's weekly output of cases of candy varies with the number of workers hired, as shown in the following table: $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Number d } \\\text { warkers }\end{array} & \text { Cases/reek } \\\hline 0 & 0 \\\hline 1 & 160 \\\hline 2 & 310 \\\hline 3 & 450 \\\hline 4 & 580 \\\hline 5 & 700 \\\hline 6 & 810 \\\hline\end{array}$$  
If each case sells for $3 more than the cost of the materials used in producing it, then the most Sam would pay the 5?? worker is ________ per week.

A)$330
B)$360
C)$390
D)$120

Question 20

Suppose the Tasty Taco Company produces tacos. The number of tacos it can produce each hour depends on the number of workers it hires, as shown in the accompanying table. In addition, each taco can be sold for 50 cents more than the cost of the ingredients needed to produce it.  
$$\begin{array} { | c | c | } \hline \text { Number af warkers per hour } & \text { Number of tacas per hour } \\\hline 0 & 0 \\\hline 1 & 25 \\\hline 2 & 45 \\\hline 3 & 60 \\\hline 4 & 70 \\\hline 5 & 75 \\\hline\end{array}$$  
What is the value of the marginal product of the 4th worker hired each hour?

A)$70
B)$35
C)$5
D)$10

Question 21

Paper Pushers Inc. hires workers in a competitive labor market. Apart from labor, the company has no other variable inputs. The company's hourly output varies with the number of workers hired, as shown in the table.  
$$\begin{array} { | c | c | } \hline \text { Warkers } & \text { Puges/huur } \\\hline 0 & 0 \\\hline 1 & 40 \\\hline 2 & 75 \\\hline 3 & 105 \\\hline 4 & 125 \\\hline 5 & 140 \\\hline 6 & 150 \\\hline 7 & 155 \\\hline\end{array}$$  
If each page sells for $2 and the market wage is $15 per hour, then this firm will hire ________ workers per hour.

A)4
B)5
C)6
D)7

Question 22

A firm is unlikely to hire a worker if:

A)the additional revenue generated by hiring the worker is less than his or her wage.
B)the additional output a firms gets by hiring the worker is greater than his or her wage.
C)there are diminishing marginal returns to labor.
D)the minimum wage set by law is less than the equilibrium wage in the market.

Question 23

To derive the labor demand curve for a particular market, one should ________ for all the firms in the market.

A)vertically sum the value of the marginal product of labor curves
B)vertically sum the marginal product of labor curves
C)horizontally sum the value of the marginal product of labor curves
D)horizontally sum the marginal product of labor curves

Question 24

Gino's Pizza shop hires workers in a competitive market to make pizza. The ingredients required to make each pizza cost $5. Daily output at Gino's Pizza varies with the number of workers hired, as shown in the table:  
$$\begin{array} { | c | c | } \hline \text { Number di warkers } & \text { Pizfas/day } \\\hline 0 & 0 \\\hline 1 & 16 \\\hline 2 & 36 \\\hline 3 & 54 \\\hline 4 & 70 \\\hline 5 & 84 \\\hline 6 & 96 \\\hline\end{array}$$  
If pizzas sell for $8 each, what is the value marginal product for the 4?? worker?

A)$96 per day
B)$112 per day
C)$48 per day
D)$128 per day

Question 25

Paper Pushers Inc. hires workers in a competitive labor market. Apart from labor, the company has no other variable inputs. The company's hourly output varies with the number of workers hired, as shown in the table.  
$$\begin{array} { | c | c | } \hline \text { Warkers } & \text { Puges/huur } \\\hline 0 & 0 \\\hline 1 & 40 \\\hline 2 & 75 \\\hline 3 & 105 \\\hline 4 & 125 \\\hline 5 & 140 \\\hline 6 & 150 \\\hline 7 & 155 \\\hline\end{array}$$  
If the market price of each page is $5, the first worker's VMP is ________ per hour, and the third worker's VMP is ________ per hour.

A)$20; $525
B)$200; $150
C)$200; $525
D)$20; $15

Question 26

Technological advances that increase the marginal product of labor will lead to:

A)a decrease in the demand for labor because the firm won't need as many workers.
B)an increase in the demand for labor because workers will be more productive.
C)no change in demand for labor because the demand for labor depends on the wage.
D)a decrease in the supply of labor because fewer workers can get the job done.

Question 27

Gino's Pizza shop hires workers in a competitive market to make pizza. The ingredients required to make each pizza cost $5. Daily output at Gino's Pizza varies with the number of workers hired, as shown in the table:  
$$\begin{array} { | c | c | } \hline \text { Number di warkers } & \text { Pizfas/day } \\\hline 0 & 0 \\\hline 1 & 16 \\\hline 2 & 36 \\\hline 3 & 54 \\\hline 4 & 70 \\\hline 5 & 84 \\\hline 6 & 96 \\\hline\end{array}$$  
If the pizzas sell for $10 each, and the competitive market wage is $75 per day, Gino will hire ________ workers and produce ________ pizzas per day.

A)5; 84
B)2; 36
C)3; 54
D)4; 70

Question 28

The optimal number of workers for a perfectly competitive firm to hire occurs when

A)total labor cost equals total revenue.
B)diminishing marginal productivity is first experienced.
C)the wage rate equals the marginal product of the last worker.
D)the wage rate equals the value of marginal product of the last worker.

Question 29

The general rule governing the hiring of workers is to:

A)minimize average labor costs.
B)equate marginal labor costs to marginal labor benefits.
C)equate total labor costs to total labor benefits.
D)maximize the marginal product of labor.

Question 30

Kyle works for a perfectly competitive firm where he receives a wage rate of $15. From this, one can infer that:

A)Kyle's marginal product is at least $15.
B)the price of the firm's output is at least $15.
C)Kyle's reservation wage is $15.
D)Kyle's value of marginal product is at least $15.

Question 31

A firm's demand for labor will increase if the:

A)price of the firm's output increases.
B)price of the firm's output decreases.
C)marginal product of labor decreases.
D)wage rate rises.

Question 32

Gino's Pizza shop hires workers in a competitive market to make pizza. The ingredients required to make each pizza cost $5.  Daily output at Gino's Pizza varies with the number of workers hired, as shown in the table:  
$$\begin{array} { | c | c | } \hline \text { Number di warkers } & \text { Pizfas/day } \\\hline 0 & 0 \\\hline 1 & 16 \\\hline 2 & 36 \\\hline 3 & 54 \\\hline 4 & 70 \\\hline 5 & 84 \\\hline 6 & 96 \\\hline\end{array}$$  
The marginal product of the 3rd worker is ________ pizzas per day.

A)12
B)14
C)16
D)18

Question 33

In a perfectly competitive labor market, if the value of marginal product of the last worker hired is $20 and the wage rate is $25, then the firm should:

A)hire fewer workers.
B)hire more workers.
C)not change the number of workers it hires.
D)either hire more or fewer workers, depending on the price of the firm's output.

Question 34

If demand for the product you make were to suddenly decline, you would expect the equilibrium price of the product to fall, which would lead to:

A)an increase in the VMP of each worker.
B)a decrease in the VMP of each worker.
C)no change the VMP of each worker because product prices don't affect worker productivity.
D)a decrease in the marginal productivity of each worker.

Question 35

If the labor market in the United States is perfectly competitive, the labor supply curve would shift to the right if:

A)the United States relaxed its immigration laws.
B)fewer mothers started returning to work after their children were born.
C)firms replaced human workers with robots.
D)firms opened more plants overseas.

Question 36

Paper Pushers Inc. hires workers in a competitive labor market. Apart from labor, the company has no other variable inputs. The company's hourly output varies with the number of workers hired, as shown in the table. $$\begin{array} { | c | c | } \hline \text { Warkers } & \text { Puges/huur } \\\hline 0 & 0 \\\hline 1 & 40 \\\hline 2 & 75 \\\hline 3 & 105 \\\hline 4 & 125 \\\hline 5 & 140 \\\hline 6 & 150 \\\hline 7 & 155 \\\hline\end{array}$$  
If the price of each page increases, then the demand for workers will

A)remain the same because changes in the output market will not affect the demand for labor.
B)increase because the workers will be motivated to produce more.
C)increase because the value of the marginal product of labor will increase.
D)decrease because at a higher sales price the firm will not have to produce as much output.

Question 37

In the market for labor, the demand function describes

A)the number of workers who are willing to work at each wage.
B)the output of workers who are paid a given wage.
C)the number of workers a firm is willing to hire at each wage.
D)the demand for the firm's output.

Question 38

In order to maximize its profits, a firm that hires workers in a perfectly competitive labor market will hire workers until the:

A)extra revenue generated from hiring another worker equals the extra profit from hiring that worker.
B)extra revenue generated from hiring another worker equals the extra cost of hiring that worker.
C)the marginal wage rate equals marginal product of the last worker.
D)the marginal product of labor begins to decline.

Question 39

Paper Pushers Inc. hires workers in a competitive labor market. Apart from labor, the company has no other variable inputs. The company's hourly output varies with the number of workers hired, as shown in the table.  
$$\begin{array} { | c | c | } \hline \text { Warkers } & \text { Puges/huur } \\\hline 0 & 0 \\\hline 1 & 40 \\\hline 2 & 75 \\\hline 3 & 105 \\\hline 4 & 125 \\\hline 5 & 140 \\\hline 6 & 150 \\\hline 7 & 155 \\\hline\end{array}$$  
The VMP of the sixth worker is ________ than the VMP of the fourth worker because ________.

A)less; the firm experiences economies of scale
B)more; of the law of increasing returns
C)less; of the law of diminishing returns
D)more; workers can specialize and exploit their comparative advantage

Question 40

Paper Pushers Inc. hires workers in a competitive labor market. Apart from labor, the company has no other variable inputs. The company's hourly output varies with the number of workers hired, as shown in the table.  
$$\begin{array} { | c | c | } \hline \text { Warkers } & \text { Puges/huur } \\\hline 0 & 0 \\\hline 1 & 40 \\\hline 2 & 75 \\\hline 3 & 105 \\\hline 4 & 125 \\\hline 5 & 140 \\\hline 6 & 150 \\\hline 7 & 155 \\\hline\end{array}$$  
As Paper Pushers Inc. hires more workers each hour, the marginal product of labor ________.

A)increases
B)decreases
C)remains constant
D)decreases and then increases

Question 41

Assume that this graph illustrates a perfectly competitive labor market. If the supply of person-hours in this market shifts to the right, then the equilibrium wage will ________ and the equilibrium number of person-hours will ________.

A)fall; increase
B)increase; increase
C)stay the same; increase
D)fall; decrease

Question 42

In a competitive labor market, the equilibrium wage rate is determined by:

A)government regulation.
B)employers.
C)labor demand and labor supply.
D)employees.

Question 43

Suppose the market wage for cashiers increases from $7 per hour to $9 per hour. As a result, Pat, who is a cashier, now works five more hours per week. On the other hand Chris, who is also a cashier, now works five fewer hours per week. Pat's behavior illustrates the ________ effect of a wage increase.

A)demand
B)supply
C)income
D)substitution

Question 44

Suppose that this graph describes the current labor market for high school teachers: If the wage is w*, then:

A)there will be a shortage of certified teachers.
B)there will be a surplus of certified teachers.
C)there will be neither a shortage nor a surplus of certified teachers.
D)teachers will be underpaid.

Question 45

Assume that the graph below describes the current labor market for nurses in a mid-sized city and that the labor market is perfectly competitive. Suppose that several years ago the supply of nurses in this city was S₀. What might explain the change from S₀ to S₁?

A)An increase in nurses' wages
B)A decrease in nurses' wages
C)Increased immigration of people trained as nurses in other countries
D)Increased employment opportunities outside of nursing

Question 46

Suppose it is observed that the equilibrium wage and employment level have both risen in a competitive labor market. One can infer that the:

A)supply of labor has increased.
B)demand for labor has decreased.
C)demand for labor has increased.
D)supply of labor has decreased.

Question 47

Suppose that this graph describes the current labor market for high school teachers: Why might the supply curve in this market shift to the left?

A)Distance learning and computer technology replace human teachers
B)Women enter the workforce in greater numbers
C)Immigration by families with children increases the need for teachers
D)More attractive employment opportunities become available in other professions

Question 48

Suppose that this graph describes the current labor market for high school teachers: Suppose supply of labor decreases. At the new equilibrium, wages would be ________ and ________ teachers would be hired.

A)higher; more
B)higher; fewer
C)lower; fewer
D)lower; more

Question 49

A reduction in workers' marginal productivity would result in:

A)an increase in labor demand.
B)an increase in equilibrium employment level.
C)a reduction in the equilibrium wage rate.
D)a decrease in labor supply.

Question 50

If the labor market for doctors is perfectly competitive, then an increase in the demand for doctors is likely to cause:

A)doctors' wages to increase.
B)the working conditions of doctors to deteriorate.
C)a persistent shortage of doctors.
D)the supply of doctors to fall.

Question 51

Assume that this graph illustrates a perfectly competitive labor market. Equilibrium in this labor market is at a wage of ________ per hour and an employment level of ________ person-hours per day.

A)$30; 100
B)$30; 150
C)$20; 200
D)$20; 125

Question 52

Assume that the graph below describes the current labor market for nurses in a mid-sized city and that the labor market is perfectly competitive. If supply shifts from S₀ to S₁ and demand shifts from D₀ to D₁, then the equilibrium wage will ________, and the equilibrium number of nurses will ________.

A)stay the same; stay the same
B)stay the same; increase
C)increase; stay the same
D)increase; increase

Question 53

The value of marginal product curve is downward sloping because:

A)firms must lower price to sell more.
B)at lower wages, only less qualified workers are available.
C)of the law of diminishing returns.
D)profits decline as more workers are hired.

Question 54

A decrease in demand for a firm's output results in a(n):

A)increase in labor supply.
B)decrease in labor demand.
C)decrease in labor supply.
D)increase in labor demand.

Question 55

If technological developments increase the marginal product of labor, then the:

A)supply of labor will increase.
B)demand for labor will decrease.
C)the equilibrium wage rate will decrease.
D)demand for labor will increase.

Question 56

Assume that the graph below describes the current labor market for nurses in a mid-sized city and that the labor market is perfectly competitive. If supply shifts from S₀ to S₁ and demand shifts from D₀ to D₁, then

A)wages will have to rise to $60 to avoid a nursing shortage.
B)wages will have to rise to $50 to avoid a nursing shortage.
C)a wage of $40 will be sufficient to achieve equilibrium.
D)a wage of $50 will lead to an excess supply of nurses.

Question 57

Assume that this graph illustrates a perfectly competitive labor market. Suppose a minimum wage law required the wage to be at least $20 per hour in this market. If that happened, then:

A)there would be an excess supply of person-hours.
B)there would be excess demand for person-hours.
C)the demand for person-hours would shift to the right.
D)there would be no change in the equilibrium number of person-hours.

Question 58

Suppose that this graph describes the current labor market for high school teachers: Given an initial wage of w*, then immediately following a decrease in supply:

A)there will be a shortage of high school teachers.
B)there will be an excess supply of high school teachers.
C)the reservation wage of each remaining teacher will fall.
D)the equilibrium wage will fall.

Question 59

Suppose the market wage for cashiers increases from $7 per hour to $9 per hour. As a result, Pat, who is a cashier, now works five more hours per week. On the other hand Chris, who is also a cashier, now works five fewer hours per week. Chris's behavior illustrates the ________ effect of a wage increase.

A)demand
B)supply
C)income
D)substitution

Question 60

Assume that this graph illustrates a perfectly competitive labor market. In this market, at a wage of $40:

A)the market would be in equilibrium.
B)more people would want to work than number of job openings.
C)firms would not be able to find enough workers to fill all their positions.
D)approximately 175 worker hours would be hired.

Question 61

Which of the following factors is not part of an individual's stock of human capital?

A)Intelligence
B)Years of education
C)Employment status
D)Initiative

Question 62

Ben and Ashley are identical in every way except for one: Ashley has a master's degree and Ben does not. You would expect Ashley to be paid:

A)the same amount as Ben.
B)more than Ben and more than his VMP.
C)less than Ben.
D)more than Ben.

Question 63

According to the textbook, the union wage premium for workers with the same amount of human capital is about ________.

A)40 percent
B)30 percent
C)20 percent
D)10 percent

Question 64

A group of workers who bargain collectively with employers for higher wages and better working conditions is called a:

A)labor monopsony.
B)labor union.
C)labor collective.
D)closed shop.

Question 65

Union membership in the United States probably ________ an important explanation for why workers with similar qualifications earn different incomes because union membership rates are relatively ________.

A)is; high
B)is; low
C)is not; high
D)is not; low

Question 66

Suppose Sarah has been offered a position as web designer at Firm A and Firm B. Both firms require their employees to work for 9 hours a day, but Firm A allows its employees to have a flexible work schedule, while Firm B requires its employees to be at work from 9am to 5pm. Otherwise, the jobs are identical. You would expect:

A)Sarah's wages to be the same at both firms.
B)Sarah's wages to be higher at Firm A than at Firm B.
C)Sarah's wages to be lower at Firm A than at Firm B.
D)Sarah to turn down both job offers.

Question 67

If workers in one part of the labor market unionize, then all else equal, we would expect the wages of unionized workers to ________, and the wages of nonunionized workers to ________.

A)rise; fall
B)rise; remain unchanged
C)remain unchanged; fall
D)fall; remain the same

Question 68

An arbitrary preference by an employer for one group of workers over another is termed:

A)customer discrimination.
B)statistical discrimination.
C)employer discrimination.
D)employee discrimination.

Question 69

One reason nonunionized firms do not always drive unionized firms out of business is that:

A)markets are not competitive.
B)unionized firms reduce the value of total output.
C)unionized firms hire more selectively, employing workers with greater human capital.
D)unionized firms receive government subsidies.

Question 70

Curly just graduated from State U and has three job offers: teaching at a prestigious private high school nine months a year with summers off, working forty hours a week at a bank in a small city, and working more than sixty hours a week for a high-powered investment firm in New York. Suppose all of the jobs currently offer exactly the same annual salary, and that most people prefer leisure to work, all else equal. In order to attract workers, the ________ would have to offer a ________ salary than the others.

A)high school; lower
B)bank; higher
C)investment firm; lower
D)investment firm; higher

Question 71

Curly just graduated from State U and has three job offers: teaching at a prestigious private high school nine months a year with summers off, working forty hours a week at a bank in a small city, and working more than sixty hours a week for a high-powered investment firm in New York. The annual salary for each of these offers is probably:

A)lowest at the investment firm, in the middle at the bank, and highest at the high school.
B)lowest at the bank, in the middle at the investment firm, and highest at the high school.
C)lowest at the high school, in the middle at the investment firm, and highest at the bank.
D)lowest at the high school, in the middle at the bank, and highest at the investment firm.

Question 72

Jobs in which there is a higher risk of injury or death will:

A)hire risk-averse workers.
B)pay less than otherwise similar jobs.
C)pay the same as otherwise similar jobs.
D)pay more than otherwise similar jobs.

Question 73

Curly just graduated from State U and has three job offers: teaching at a prestigious private high school nine months a year with summers off, working forty hours a week at a bank in a small city, and working more than sixty hours a week for a high-powered investment firm in New York. Suppose all of the jobs paid exactly the same annual salary, and that most people prefer leisure to work, all else equal. If that were the case:

A)there would be a shortage of teachers at the high school.
B)there would be a surplus of workers at the investment firm.
C)there would be a surplus of teachers at the high school.
D)people would naturally sort themselves into the job that best suits their talents.

Question 74

Differences in wage rates associated with differences in working conditions are called:

A)compensating income differentials.
B)equalizing wage ratios.
C)conditional differentials.
D)compensating wage differentials.

Question 75

The union wage premium refers to the:

A)dues one must pay in order to be in a union.
B)union wage rate minus union membership dues.
C)deduction for union insurance.
D)amount by which union wages exceed nonunion wages.

Question 76

Taken together, factors such as education, training, experience, intelligence, and work habits are known as:

A)statistical discrimination factors.
B)human capital.
C)productivity factors.
D)learned behaviors.

Question 77

Which of the following is not a reason why unionized firms can successfully compete with nonunionized firms?

A)Employee morale may be higher at unionized firms, so workers are more productive.
B)Communication between management and workers is better at unionized firms.
C)Labor turnover is lower at unionized firms, so unionized firms have lower hiring costs.
D)Unionized firms are legally protected from price competition with nonunionized firms.

Question 78

The fact that many primary and secondary school teachers enjoy work schedules that coincide with their children's school schedules:

A)implies that teachers will earn less than workers with similar qualifications in other jobs.
B)implies that teachers will earn more than workers with similar qualifications in other jobs.
C)has no bearing on the wages of teachers relative to the wages of workers in other jobs.
D)arises because the market for teachers is a winner-take-all market.

Question 79

The value of a worker's marginal product of labor:

A)is not affected by a worker's stock of human capital.
B)is lower for workers with more human capital.
C)is higher for workers with more human capital.
D)only depends on a worker's stock of human capital.

Question 80

A labor union in a labor market is analogous to a(n)________ in an output market.

A)monopsony
B)oligopoly
C)cartel
D)perfect competitor