Deck 18: Using Input Market Analysis

Question 1

In a labor market characterized by a downward-sloping demand curve and an upward-rising supply curve,the disemployment effect of a minimum wage does not equal the total unemployment caused by the minimum wage.Which of the following can explain this difference?

A)The demand for unskilled labor increases with an increase in the wage rate
B)At a higher wage,more people may enter the job market
C)The demand for skilled labor increases with an increase in the wage rate
D)At a higher wage,the supply of labor becomes inelastic

Answer 1

B

Question 2

Employers sometimes reduce the fringe benefits provided to workers when the government sets a minimum wage in the labor market.Due to this:

A)the real wage that employers pay increases by more than the money wage.
B)the real wage that employers pay declines and is at times zero.
C)the real wage that employers pay increases at the same rate as the money wage.
D)the real wage that employers pay increases by less than the money wage.

Answer 2

D

Question 3

The figure given below shows the demand and supply of unskilled labor that determines the equilibrium wage rate in the labor market.The minimum wage rate at $5.15 is higher than the equilibrium wage rate at $4.
Refer to Figure 18-1.Which of the following distances represents the complete unemployment created by the minimum wage legislation?

A)OL₃
B)L₂L₃
C)L₂ L₁
D)OL₂

Answer 3

B

Question 4

Consider two groups of workers both facing identical downward-sloping demand curves.The labor supply curve of group A workers is relatively elastic,while that of group B workers is relatively inelastic.Which of the following will result if the government imposes a minimum wage in both these labor market?

A)Group A workers will experience a higher disemployment effect than group B workers.
B)Group B workers will experience a higher disemployment effect than group A workers.
C)The total unemployment experienced by Group A workers will be higher than Group B workers.
D)The total unemployment experienced by Group B workers will be higher than Group A workers.

Question 5

The cost of the minimum wage is most likely borne by:

A)consumers who buy goods produced in the covered industry.
B)producers who produce goods in the covered industry.
C)producers in both the covered and uncovered industries.
D)consumers who have a perfectly elastic demand for goods produced by the covered industry.

Question 6

A minimum wage mandated by the government will result in an increase in:

A)the supply of workers to the uncovered sector.
B)the wage rate in the uncovered sector.
C)employment opportunities in the covered sector.
D)the demand for workers in the covered sector.

Question 7

The disemployment effect of a minimum wage is greater the:

A)more elastic the supply curve of unskilled workers,for a given demand curve.
B)more inelastic the supply curve of unskilled workers,for a given demand curve.
C)the more inelastic the demand curve for unskilled workers,for a given supply curve.
D)the more elastic the demand curve for unskilled workers,for a given supply curve.

Question 8

Suppose the current wage of Type A workers is $5 per labor hour,while that of Type B workers is $7 per labor hour.If the government sets the minimum wage in the labor market at $8 per labor hour,which of these two groups would experience a higher increase in the wage rate and by what percentage?

A)Type B workers;the wage rate would increase by 10 percent
B)Type A workers;the wage rate would increase by 10 percent
C)Type A workers;the wage rate would increase by 60 percent
D)Type B workers;the wage rate would increase by 60 percent

Question 9

Which of the following is not a consequence of the minimum wage law?

A)Reduced employment among low-skilled workers
B)Increased numbers of workers seeking jobs at the minimum wage
C)Higher incomes for some low-income workers
D)A large redistribution of income favoring low-income workers

Question 10

The figure given below shows the demand and supply of unskilled labor that determines the equilibrium wage rate in the labor market.The minimum wage rate at $5.15 is higher than the equilibrium wage rate at $4.
Refer to Figure 18-1.Which of the following distances represents the disemployment effect of the minimum wage?

A)L₁L₃
B)L₂L₃
C)L₂ L₁
D)OL₂

Question 11

Minimum wage laws are promoted as the means of increasing the standard of living of the working poor.Which of the following is the most likely adverse consequence of minimum wage laws that makes the working poor worse off?

A)The least skilled workers are priced out of the labor market.
B)Firms respond by increasing other forms of non-wage compensation such as training and holiday pay.
C)The average price level declines,increasing the spending power of the people.
D)The skilled workers end up receiving a below average wage rate.

Question 12

The figure given below shows the demand and supply of unskilled labor that determines the equilibrium wage rate in the labor market.The minimum wage rate at $5.15 is higher than the equilibrium wage rate at $4.
Refer to Figure 18-1.The increase in the number of workers looking for work in this market due to the imposition of a $5.15 minimum wage is _____.

A)L₁L₃
B)L₂L₃
C)OL₁
D)L₂L₁

Question 13

Consider a labor market where the demand for labor is downward-sloping but the supply of labor is perfectly inelastic.Which of the following will hold true in this market when a minimum wage is imposed by the government?

A)The disemployment effect will surpass the total unemployment caused by the minimum wage.
B)The total unemployment will surpass the disemployment effect caused by the minimum wage.
C)The minimum wage will not decrease the total labor employment.
D)The disemployment effect will be equal to the total unemployment caused by the minimum wage.

Question 14

The disemployment effect of the minimum wage refers to the tendency of employers to:

A)hire experienced workers at higher wages.
B)hire fewer workers at higher wages.
C)pay lower wages to skilled workers.
D)hire more workers at a lower wage.

Question 15

The minimum wage law is not an effective instrument for fighting poverty because:

A)only skilled workers are covered under the minimum wage law.
B)many workers whose wages are affected by the law do not live in poor families.
C)only about half of employers comply with the law.
D)increases in the minimum wage cause large increases in unemployment.

Question 16

According to the Fair Labor Standards Act,which of the following workers are not covered under the minimum wage law?

A)Farm workers
B)Retailers
C)Skilled professionals
D)Engineers

Question 17

Which of the following acts passed by the Congress in 1938 established a minimum wage for workers in the U.S.?

A)The Right to Employment Act
B)The Fair Labor Standards Act
C)The Employment Act
D)The American Jobs Act

Question 18

Which of the following categories of workers are directly affected by the minimum wage law?

A)Unskilled workers
B)Learned professionals
C)Businessmen
D)Part-time workers

Question 19

Which of the following is most likely to occur after an increase in the minimum wage?

A)Low-skilled minority workers will face less discrimination in seeking employment.
B)The demand for skilled workers will fall.
C)Wages will rise in the sectors of the economy not covered by the law.
D)Employers will reduce the fringe benefits for workers who are covered by the law.

Question 20

The cost of the mandated minimum wage is most likely to be borne by the:

A)high income taxpayers who must pay the taxes to finance the program.
B)consumers who purchase the goods produced by unskilled workers.
C)businesses whose profits will fall due to the higher wage rates.
D)government which pays the difference between the equilibrium and the minimum wage.

Question 21

Which of the following factors determines the extent of the fall in the net-of-tax wage rate after the imposition of a payroll tax?

A)The productivity of the employees
B)The efficiency wage in the labor market
C)The elasticities of supply and demand
D)The minimum wage imposed by the government

Question 22

Which of the following is true regarding the incidence of the social security tax?

A)Regardless of how the tax is collected,employees always bear the entire tax burden.
B)Most economists believe that employers generally bear most of the burden of the social security tax.
C)When the aggregate labor supply curve is said to be inelastic,the income and substitution effects of a social security tax exactly offset one another.
D)When the supply curve of labor is perfectly elastic the net wage received by workers falls by the entire amount of the tax.

Question 23

Most of a payroll tax is eventually paid by:

A)employers if the supply curve of labor is very inelastic.
B)employers if the labor demand curve is unit elastic.
C)employees if the supply of labor curve is very inelastic.
D)employees if the supply of labor curve is very elastic.

Question 24

Which of the following will result from a social security tax if the labor supply curve is vertical,but the labor demand curve is downward-sloping?

A)Lower after-tax wages
B)Unchanged levels of employment
C)Higher labor costs to firms
D)A fall in output prices

Question 25

An aggregate labor supply curve is likely to be vertical if:

A)there is a fixed supply of labor.
B)the opportunity cost of labor service is high.
C)the substitution effect of a wage increase exactly offsets the income effect.
D)leisure is a normal good.

Question 26

The figure given below shows the demand and supply curves of labor.A per-unit tax imposed on the wage income of the employees shifts the supply curve of labor upward.
According to Figure 18-2,the proportion of the per-unit tax paid by employees is:

A)CB/CA.
B)BA/OB.
C)AB/CA.
D)OA/OC.

Question 27

The figure given below shows the demand and supply curves of labor.A per-unit tax imposed on the wage income of the employees shifts the supply curve of labor upward.
In Figure 18-2,as a result of a per-unit tax:

A)the total wage paid by employers rises,while the net-wage received by employees declines.
B)the total wage paid by employers declines,while the net-wage received by the employees rises.
C)the total wage paid by employers declines.
D)the total wage received by employees decline.

Question 28

A change in the social security system which required employers to pay the full amount of the social security tax rather than the 50 percent they now pay would:

A)force the employers to bear the entire tax burden.
B)reduce the burden of the tax on the employees but not eliminate the burden completely.
C)have no effect on the portion of the tax borne by the employees and the portion borne by the employers.
D)increase the burden of the tax on the employees.

Question 29

Empirical evidence suggests that a large majority of the poor,in the U.S. ,are not directly affected by the minimum wage.This is because most poor workers:

A)do not have a job.
B)earn a below subsistence wage.
C)do not receive any government aid.
D)live in households with income above the poverty line.

Question 30

The figure given below shows the demand and supply curves of labor.A per-unit tax imposed on the wage income of the employees shifts the supply curve of labor upward.
According to Figure 18-2,the proportion of the per-unit tax paid by the employers is:

A)OA/OB.
B)AB/AC.
C)BC/AC.
D)BC/AB.

Question 31

The federal minimum wage is:

A)not likely an efficiency wage because it does not attract high quality workers.
B)likely an efficiency wage because it prevents firms from hiring unskilled workers and lowers it total cost of production.
C)likely an efficiency wage because it lowers the costs of searching for new workers.
D)not likely an efficiency wage because firms would attempt to earn higher profits without any government intervention.

Question 32

The real burden of a social security tax would be:

A)higher on workers if it is collected from employees rather than from employers.
B)higher on workers if it is collected from employers rather than from employees.
C)higher on workers if it is partly collected from employers rather than entirely collected from employees.
D)the same regardless of whether it is collected from employers or employees.

Question 33

When the supply curve of labor is perfectly inelastic the burden of a social security tax is:

A)borne partly by the employers and partly by employees.
B)borne partly by the employers only if the demand for labor is elastic.
C)entirely borne by the employees.
D)entirely borne by the employers.

Question 34

The figure given below shows the demand and supply curves of labor.A per-unit tax imposed on the wage income of the employees shifts the supply curve of labor upward.
Refer to Figure 18-2.The total revenue collected by the government from the per-unit tax is represented by the area:

A)BFL₁O.
B)CEL₂O.
C)ABFG.
D)ACEG.

Question 35

The figure given below shows the demand and supply curves of labor.A per-unit tax imposed on the wage income of the employees shifts the supply curve of labor upward.
Refer to Figure 18-2.The per-unit tax is this figure is being represented by the distance:

A)OB.
B)OA.
C)AB.
D)AC.

Question 36

In determining who bears the burden of the social security tax,it is important to consider:

A)the number of workers employed.
B)the way it is imposed on employers and employees.
C)the supply elasticity of labor.
D)the total labor hours supplied by each worker.

Question 37

An increase in the minimum wage imposed by the government causes an increase in unemployment because:

A)the labor supply curves are backward-bending.
B)the demand curves for labor are downward-sloping.
C)leisure is a normal good.
D)the increase in the wage rate reduces the price of leisure.

Question 38

Which of the following is true of an efficiency wage?

A)It refers to the markup of the actual wage over the minimum wage.
B)It refers to the wage paid to workers above their opportunity cost,which compels them to work harder.
C)It refers to the wage paid to workers that minimizes total expenditure on labor costs.
D)It measures the markup of wages paid to workers and their actual output.

Question 39

Which of the following defines an efficiency wage?

A)It is the equilibrium wage rate in the labor market where the demand for labor exactly matches the supply of labor.
B)It is an above-market wage which increases the firms' profits by increasing the productivity of all factors of production.
C)It is an above-market wage which increases the firms' profits by lowering the costs of searching for,selecting,and training new workers.
D)It is a below-market wage which increases the employment opportunities in an economy and reduces overall poverty.

Question 40

The aggregate supply curve of hours of work used to analyze a payroll tax is generally:

A)elastic.
B)perfectly elastic.
C)inelastic.
D)unit elastic.

Question 41

Which of the following is consistent with the National Collegiate Athletic Association [NCAA] representing a cartel among schools in their "hiring" of student-athletes?

A)Many schools violate NCAA rules.
B)Some schools make large profits from their basketball and football programs.
C)As television has increased the demand for college athletic events,the number and severity of NCAA penalties have increased.
D)The wage paid to an athlete under NCAA guidelines is equal to the athlete's marginal value product.

Question 42

Which of the following is true for a competitive firm operating in an input market cartel?

A)The individual firm's demand curve for the input is downward sloping when it acts alone.
B)The individual firm's supply curve is horizontal when it acts alone and upward sloping with coordinated hiring.
C)The individual firm's supply curve is upward sloping when the firm acts alone but horizontal otherwise.
D)The individual firm's supply curve is horizontal when it acts alone and downward sloping with coordinated hiring.

Question 43

The U.S.Social Security system:

A)invests the taxes paid by workers in interest-bearing assets.
B)requires workers to pay a fixed lump sum tax every year.
C)encourages people to save more.
D)transfers funds from current workers to current retirees.

Question 44

When the supply curve of labor is perfectly inelastic and a social security tax is collected partly from employers and partly from employees,the burden of the tax is:

A)entirely borne by the employees.
B)entirely borne by the employers.
C)borne by both the employers and the employees.
D)borne by the employers only if labor demand is elastic.

Question 45

Which of the following factors hinders the success of a cartel agreement between input buyers?

A)Government intervention in the input market
B)Presence of a small number of firms in different input industries
C)The use of a variety of inputs in the production of a good by firms
D)The low demand for the final product in the output market

Question 46

The National Collegiate Athletic Association [NCAA] is a private organization empowered to regulate various aspects of college athletics.If this organization is somehow unable to prohibit schools that violate its rules from participating in postseason tournaments,we can expect:

A)less number of student athletes to receive scholarships.
B)the student-athletes to be paid far more than they are worth to their colleges.
C)the schools that abide by the rules to find their athletic programs more profitable.
D)fewer violations of the NCAA rules to occur.

Question 47

Suppose the firms in a competitive industry form a cartel to reduce the price of one of the inputs they purchase.Which of the following will result from this collusive behavior?

A)The firms will employ fewer units of the input whose price they want to reduce.
B)The firms will substitute other inputs for the input whose price they want to reduce.
C)The price of the firms' final product will increase.
D)The firms will be able to earn lower profits.

Question 48

The National Collegiate Athletic Association [NCAA] has been able to control cheating by:

A)reducing the number of athletic scholarships a school caught cheating can grant.
B)taking away the accreditation of schools caught cheating.
C)not permitting coaches,who were caught cheating once,to coach any more.
D)setting an official wage for the athletes that is below the market-clearing wage.

Question 49

The Social Security system affects the demand curve for labor because:

A)it lowers savings which translates to a lower capital stock.
B)it promotes capital accumulation.
C)it increases the productivity of the workers.
D)it increases overall investment in a nation.

Question 50

Which of the following will result when the pay-as-you-go Social Security program is introduced in a country?

A)The supply curve of saving will shift rightward
B)The market interest rate will decline
C)Gross investment in the economy will decline
D)The investment demand curve will become inelastic

Question 51

For a firm that operates in an input market cartel that has successfully coordinated input prices among the cartel members,the marginal cost of the input:

A)exceeds the input's price.
B)is less than the input price.
C)is constant and equals unity.
D)is zero.

Question 52

Which of the following will be a long run impact of a pay-as-you-go Social Security program?

A)A shortage in the labor market
B)A sluggish growth in the capital stock of the economy
C)An increase in the gross domestic product
D)An increase in the average wage rate

Question 53

Which of the following is an argument in favor of the National Collegiate Athletic Association [NCAA] cartel?

A)Those harmed by the NCAA policies are often more well off than those who benefit.
B)Student athletes are paid much more than their marginal value product.
C)Paying college athletes would destroy their amateur status and turn college athletics into a business.
D)NCAA policies result in a perfectly competitive market for student-athletes.

Question 54

If the current Social Security system in a country is a "pay-as-you-go" system,it means that:

A)employers and employees must pay taxes once in a month.
B)employers pay the bulk of employees' retirement costs.
C)individual retirement accounts are set up for each work as they go.
D)taxes from current workers are transferred to current retirees.

Question 55

Suppose in the absence of a tax a firm employs 50 skilled workers at a wage rate of $20 per labor hour.If the supply of labor is perfectly inelastic,what will be the impact of a $2.50 per hour tax on the net wage received by the workers and total employment?

A)The net wage received by workers will be $17.50 per labor hour but total employment will not change.
B)The net wage received by workers will be $15 per labor hour and total employment will reduce to 25 workers.
C)The net wage received by workers will be $1750 per labor hour and total employment will reduce to 45 workers.
D)The net wage received by workers will be $15 per labor hour and total employment will increase to 75 workers.

Question 56

Which of the following is a true impact of a Social Security program on the labor market?

A)It shifts the demand curve for labor to the left.
B)It shifts the demand curve for labor outward.
C)It increases the before-tax wage rate.
D)It increases the after-tax wage rate.

Question 57

One adverse effect of the pay-as-you-go system of funding Social Security is that:

A)it builds up a surplus of savings,which increases interest rates.
B)it reduces private capital formation,thus reducing future incomes.
C)it reduces the wealth of the elderly who spend most of their income on consumption rather than on investment goods.
D)it creates an income disparity between the working age population and the elderly.

Question 58

Which of the following facts indicate that the official wage paid by the National Collegiate Athletic Association [NCAA] to the athletes is below the market-clearing level?

A)Athletes practicing for greater number of hours before the seasonal tournaments
B)Schools awarding more athletic scholarships to the students
C)Athletes receiving cars,apartments,and cash payments
D)Athletes receiving offers for promotional advertisement campaigns

Question 59

A cartel agreement between input buyers would try to:

A)make the supply curve of their product more elastic.
B)shift their demand curve for labor to the right.
C)replicate monopsony and reduce input prices.
D)replicate monopoly and increase prices.

Question 60

An employer's cartel will seek to:

A)restrict the employment of the input and lower its price below its marginal revenue product.
B)restrict the employment of the input and raise its price to the marginal factor cost.
C)decrease the price of the input by employing more units of the input.
D)restrict the employment of the input and increase its productivity.

Question 61

Suppose the market wage of nurses is raised from $14 an hour to $18 an hour because of a comparable-worth program,which aims to equalize the wages earned by men and women for similar jobs.Which of the following would result from this policy?

A)There would be a surplus of nurses only if the demand for nurses is inelastic.
B)There would be a shortage of nurses.
C)There would be a surplus of nurses.
D)There would be a shortage of nurses only if the demand for nurses is inelastic.

Question 62

The figure given below shows the impact of immigration on the labor market of a country.Immigration in shifts the labor supply curve from S to S'.
Refer to Figure 18-3.The increase in the income of the capital owners in the country,due to immigration,is represented by the area:

A)ABC.
B)wACw'.
C)ABCE.
D)wABw'.

Question 63

Explain graphically that a payroll tax imposed by the government either on the employers or on the employees will have a similar impact.

Question 64

Which of the following is not a predictable result of a refusal by a small number of employers to hire African Americans?

A)The wage rates of African Americans falls below those for whites
B)Non-discriminating firms hire larger proportions of African Americans
C)Segregated employment patterns will emerge
D)Non-discriminating firms hire smaller proportions of whites

Question 65

What determines who bears the burden of the social security tax?

Question 66

Which of the following explains why immigration has led to an increase in income inequality in the U.S.?

A)Immigration has increased the supply of experienced and skilled laborers who effectively earn more than the U.S.workers.
B)Immigration has lowered the wage earnings of the U.S.residents and increased the income of the capital owners.
C)The proportion of immigrants in the working-age population has far exceeded the proportion of U.S.workers
D)The immigrants are more educated than the domestic residents

Question 67

A recent study investigating discrimination in hiring found that 20 percent of the employers in the sample discriminated against African Americans and 7 percent discriminated against whites.If the sample of firms is representative of the population as a whole,it can be predicted that:

A)African Americans will earn more on average than whites even when they are equally qualified.
B)African Americans will earn more than whites in 20 percent of the firms and whites will earn more than African Americans in 7 percent of the firms.
C)equally qualified African Americans and whites will earn the same on average,but the proportion of African Americans to whites will vary across firms.
D)20 percent of the African Americans and 7 percent of the whites will earn more than the average wage.

Question 68

Which of the following is not likely to contribute to wage disparity between men and women?

A)Differences in employment experience
B)Primary care responsibilities for family
C)An increase in technology related employment
D)Differences in the average number of hours worked per week

Question 69

The figure given below shows the impact of immigration on the labor market of a country.Immigration in shifts the labor supply curve from S to S'.
Refer to Figure 18-3.The total income of the residents of the country increases by the area _____ post immigration.

A)ABC.
B)wACw'.
C)ABCE.
D)wABw'.

Question 70

Which of the following best describes wage discrimination?

A)Workers in one firm are paid more than the workers in another firm
B)Workers in different industries are hired for different jobs
C)Workers are paid according to their productive capabilities
D)Workers having equal expected productive talents are paid differently

Question 71

What is the long run effect of a pay-as-you-go Social Security program on the gross domestic product [GDP] of a country?

Question 72

Which of the following is a major economic impact of immigration in the U.S.?

A)An increase in the labor supply
B)An increase in employment opportunities
C)A fall in the population density
D)An increase in the number of retirees

Question 73

Provide a self-interested explanation for why labor unions spend a lot of time and money lobbying for increases in minimum wage mandates and for legislated "living wage" ordinances even though their members earn far more than the proposed wages.

Question 74

According to the U.S.Congressional Budget Office,immigrants in the United States:

A)are wealthier on average than current residents.
B)are more productive on average than current residents.
C)are less educated on average than current residents.
D)are more skilled and experienced on average than current residents.

Question 75

The figure given below shows the impact of immigration on the labor market of a country.Immigration in shifts the labor supply curve from S to S'.
Refer to Figure 18-3.Post immigration the earnings of the native laborers in the country declines by the area:

A)ABC.
B)wACw'.
C)ABCE.
D)wABw'.

Question 76

Using a graph,explain the employment effects of a binding minimum wage.Who benefits,who loses,and how large are these effects?

Question 77

Consider an industry that was initially employing both male and female workers.If some of the firms in this industry decide to discriminate against the male workers,what would be the most immediate impact on the labor market?

A)The wage paid to the male workers will decline.
B)The demand curve for labor will shift upward.
C)The supply curve of labor will shift upward.
D)The wage paid to the female workers will rise.

Question 78

Discrimination in hiring practices is influenced by all of the following factors,except:

A)the number of firms that discriminate in hiring.
B)the desire of firms to make a profit.
C)the presence of nondiscriminating employers in the market.
D)the minimum wage.

Question 79

Assume that initially employers do not discriminate against women.If one third of all employers,accounting for one-third of all employment,begin to discriminate by just hiring men,then:

A)all women will begin to earn lower wage rates.
B)wages for men will rise while that of women will remain unchanged.
C)employment patterns for men and women will change,but wage rates will not change.
D)wages for women will rise while that of men will remain unchanged.

Question 80

Discrimination might exist in a labor market at times,but it is not likely to last in the long run because:

A)the supply of labor is perfectly inelastic.
B)costs are imposed on discriminators,which reduces their profits.
C)discrimination is easy to define,allowing effective remedies do eliminate it.
D)government intervention increases the cost borne by the discriminators.