Deck 12: Labor Markets, Poverty, and Income Distribution

Question 1

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 below: 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

Answer 1

4; 70

Question 2

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 below. 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.

Answer 2

less; of the law of diminishing returns.

Question 3

The marginal product of the 14^th 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 14^th worker's marginal product is

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

Answer 3

$32.

Question 4

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 below: The marginal product of the 3rd worker is ______ pizzas per day.

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

Question 5

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 below. Each cup of coffee sells for $2.00. $\begin{array}{|c|c|}\hline \begin{array}{c}\text { Number } \\\text { of } \\\text { workers }\end{array} & \begin{array}{c}\text { Coffee } \\\text { (Cups/hour) }\end{array} \\\hline 0 & 0 \\\hline 1 & 25 \\\hline 2 & 45 \\\hline 3 & 60 \\\hline 4 & 70 \\\hline 5 & 75 \\\hline\end{array}$

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 6

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

Question 7

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: If each case sells for $3 more than the cost of the materials used in producing it, then the most Sam would pay the 5th worker is ______ per week.

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

Question 8

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 below: If pizzas sell for $8 each, what is the value marginal product for the 4th worker?

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

Question 9

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 below. As Paper Pushers Inc. hires more workers each our, the marginal product of labor ______.

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

Question 10

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 11

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: 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 2nd worker is ______ per week.

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

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 below. Each cup of coffee sells for $2.00. $\begin{array}{|c|c|}\hline \begin{array}{c}\text { Number } \\\text { of } \\\text { workers }\end{array} & \begin{array}{c}\text { Coffee } \\\text { (Cups/hour) }\end{array} \\\hline 0 & 0 \\\hline 1 & 25 \\\hline 2 & 45 \\\hline 3 & 60 \\\hline 4 & 70 \\\hline 5 & 75 \\\hline\end{array}$
The marginal product of the fourth worker is ______ cups of coffee per hour.

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

Question 13

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 below. If the market price of each page is $5, the first worker's VMP is ______ per hour, and the third worker'sVMP is ______ per hour.

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

Question 14

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 below. 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 15

In competitive labor markets, _____ demand labor and ______ supply labor.

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

Question 16

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 below. 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 17

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: The marginal product of the fourth worker is _______ cases per week.

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

Question 18

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: 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 19

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 20

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 below. Each cup of coffee sells for $2.00. $\begin{array}{|c|c|}\hline \begin{array}{c}\text { Number } \\\text { of } \\\text { workers }\end{array} & \begin{array}{c}\text { Coffee } \\\text { (Cups/hour) }\end{array} \\\hline 0 & 0 \\\hline 1 & 25 \\\hline 2 & 45 \\\hline 3 & 60 \\\hline 4 & 70 \\\hline 5 & 75 \\\hline\end{array}$

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

Question 21

Suppose that this graph describes the current labor market for high school teachers: If the wage isw*, 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 22

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 23

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 24

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 25

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 26

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 27

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 28

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 29

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 30

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 the equilibrium number of person-hours.

Question 31

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 32

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 33

A firm's demand for labor will increase if

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

Question 34

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 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

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 37

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 38

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 39

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 40

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

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

Question 41

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

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

Question 42

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

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

Question 43

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 44

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 45

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 pricecompetition with nonunionized firms.

Question 46

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 47

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 48

Suppose that this graph describes the current labor market for high school teachers: Why might the supply curvein 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 49

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 50

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 51

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 52

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 53

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 54

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 55

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 her VMP.
C)less than Ben.
D)more than Ben.

Question 56

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 57

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 58

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 S₁and 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 toan excess supply of nurses.

Question 59

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 60

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 61

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 62

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 63

Suppose males place less importance on the social approval of their job and more on the income they receive. The gender wage gap would therefore be ______ than if this difference did not exist because of ______.

A)smaller; compensating wage differentials
B)larger; compensating wage differentials
C)larger; employer discrimination
D)smaller; employee discrimination

Question 64

Consumer discrimination exists when consumers are willing to pay ______ for a good or service produced by the favored group, even though the quality of the good or service is ______.

A)more; better
B)less; the same
C)more; worse
D)more; the same

Question 65

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 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 66

A winner-take-all labor market is one in which:

A)large differences in human capital translate into small differences in wages.
B)one worker receives all of the available compensation and the rest receive nothing.
C)small differences in human capital translate into small differences in wages.
D)small differences in human capital translate into large differences in wages.

Question 67

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 68

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 69

Charlie is getting a divorce. He selects a female lawyer at a large law firm because he believes they are more aggressive in obtaining favorable settlements in divorce cases. Charlie's behavior is an example of ______ discrimination.

A)market
B)employer
C)employee
D)customer

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. 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 71

In professional baseball, some players earn over $20 million per year, while the average salary is about $4 million per year. The most likely explanation for this is that:

A)the market for baseball players is a winner-take-all market.
B)the best players are 5 times better than the average player.
C)owners are overspending on players' salaries.
D)racial discrimination.

Question 72

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 73

Males major in engineering much more frequently than females. Starting salaries for engineers (male or female) are much higher than average. As a result, the observed gender wage gap for all college graduates will be ______ than the gender wage gaps in specific majors because ______.

A)larger; of employer discrimination
B)smaller; males and females choose different majors
C)larger; of academic discrimination
D)larger; males and females choose different majors

Question 74

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 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

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 77

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 78

Assume that the average male wage rate is 20% higher than the average female wage rate. One can infer that:

A)this is evidence of discrimination because females should be paid the same as males.
B)employers undervalue female employees, so they're able to pay them less.
C)customers overvalue male employers, so employers pay males more.
D)this is evidence of discrimination only if all factors affecting productivity are equal.

Question 79

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 80

Inga and Ron both work for the same firm on the same career ladder. Each has the same stock of human capital except for one difference: Inga has worked at the firm for 10 continuous years but Ron has had two leaves of absence mixed in with his 10 years of experience with the firm. One should expect:

A)Inga and Ron to earn the same income.
B)Ron to earn more than Inga.
C)Inga to earn twice as much as Ron.
D)Inga to earn more than Ron.