Deck 16: Economics of the Labor Market

Question 1

The minimum wage makes it possible for more low-skilled workers to find jobs.

Answer 1

False
Explanation: The minimum wage creates a surplus in the labor market, reducing the number of jobs available to low-skilled workers.

Question 2

Employees who are members of a labor union can expect to receive lower wages than nonunion workers in the same industry,but can also expect greater job security.

Answer 2

False
Explanation: Union workers tend to be paid more than their nonunion competitors in the same industry.

Question 3

Reducing the minimum wage would make it more difficult for low-skilled workers to find jobs.

Answer 3

False
Explanation: The minimum wage creates a surplus in the labor market, reducing the number of jobs available to low-skilled workers. Reducing the minimum wage would expand the number of jobs available.

Question 4

In a "right-to-work" state,employees cannot be required to join a union as a condition of employment.

Question 5

The labor force is the part of the adult population that is either working or actively looking for a job.

Question 6

A firm will hire workers until the

A) marginal revenue from hiring an additional worker is maximized.
B) marginal revenue from hiring an additional worker is zero.
C) average revenue from hiring an additional worker is zero.
D) marginal revenue from hiring an additional worker no longer exceeds the marginal cost of hiring that worker.

Question 7

Older,more experienced workers tend to make more than younger workers,but as a worker nears retirement,pay increases level off,and may even fall a little.

Question 8

If the equilibrium wage in the market for unskilled labor is $8.00 per hour,and the government sets a minimum wage at $7.50 per hour,unskilled workers will receive a pay cut of about 50 cents per hour.

Question 9

Globalization has had a positive effect on private sector labor union membership rates.

Question 10

As the wage rate rises,firms will respond by

A) hiring more workers because a higher wage rate will make workers work harder, thus increasing profits for the firm.
B) hiring fewer workers because the labor demand curve slopes downward.
C) selling more output to cover the additional costs of the labor force.
D) selling the same amount of output, but passing on the higher labor costs to the customer in the form of higher prices.

Question 11

The labor force is best defined as the part of the

A) population that is working or capable of working.
B) adult population that is working.
C) adult population that is either working or actively looking for a job.
D) population that is working, looking for a job, or capable of working.

Question 12

What happens to the marginal product of additional cooks in a restaurant kitchen as more cooks are hired?

A) Marginal product will stay constant.
B) Marginal product will rise continuously because each additional cook contributes something to the production process.
C) We cannot know because marginal product depends entirely on the skills of the individual cooks.
D) Marginal product will eventually fall because the cooks will start to get in each other's way and reduce each other's ability to produce.

Question 13

Which of the following best describes the marginal product of labor for an additional employee in a landscaping firm?

A) The number of additional acres the firm can mow in a week because of that employee.
B) The extra money the firm brings in because of that employee.
C) The additional profits the firm earns because of that employee.
D) The additional wages the firm must pay in labor costs because of that employee.

Question 14

Which of the following best describes the marginal cost of labor?

A) The additional cost to the firm of the taxes, fringe benefits, and office space that one more worker will require.
B) The additional cost to the firm of hiring one more unit of labor.
C) The additional cost to the firm of producing the additional product that will be sold because of hiring one more unit of labor.
D) The cost paid by the consumer, through a higher price, when a firm must raise prices to cover the cost of hiring an additional employee.

Question 15

Which of the following best describes the marginal revenue from an additional salesperson at a car dealership?

A) The additional profits the firm earns because of that employee.
B) The number of additional cars the firm sells because of that employee.
C) The increase in revenue to the dealership because of that employee.
D) The increase in wages, benefits, and other costs incurred by the dealership because of hiring that additional person.

Question 16

College-educated workers tend to reach their peak earnings between the ages of 45 and 54.

Question 17

Unions will be more effective at raising wages when it is difficult for nonunion competitors to enter the industry.

Question 18

If the labor force increases in size,which of the following would NOT occur?

A) The labor supply curve would shift to the right.
B) The equilibrium wage would fall.
C) The number of workers employed would rise.
D) The labor demand curve would shift to the right.

Question 19

Which of the following would be an effect of increased technology on the labor market?

A) People with fewer skills may face more difficulty getting a job.
B) The unemployment rate would tend to increase.
C) People with high levels of technical skill may see reduced compensation.
D) The advantage to gaining a college education would be reduced.

Question 20

If the labor force increases in size,which of the following would occur?

A) The equilibrium wage would fall.
B) The quantity of workers employed would fall.
C) The labor demand curve would shift to the right.
D) The labor supply curve would shift to the left.

Question 21

If the equilibrium wage in the market for unskilled labor is $8.00 per hour and the government sets a minimum wage at $8.00 per hour,which of the following will occur?

A) Some unskilled workers will lose their jobs.
B) The wages paid to unskilled workers will rise.
C) The number of workers employed in the market will increase.
D) The minimum wage will have no effect because it is set at the equilibrium wage.

Question 22

Which of the following statements about unionization is true?

A) Labor unions can increase wages but have virtually no impact on benefits.
B) Work stoppages due to strikes have become less common, and shorter, in the last 50 years.
C) Union membership has risen in the last 50 years as the American workforce comes under a serious threat from globalization.
D) The public sector is not heavily unionized compared to the private sector because government jobs already pay well.

Question 23

If the equilibrium wage in the market for unskilled labor is $6.00 per hour and the government sets a minimum wage at $7.50 per hour,which of the following will occur?

A) Some unskilled workers will lose their jobs.
B) The number of unskilled workers who have jobs will increase.
C) There will be a shortage of workers in the market for unskilled labor.
D) The labor demand curve will shift to the left.

Question 24

Which of the following is NOT among the economic costs of a college education?

A) The cost of tuition.
B) The cost of room and board.
C) The earnings forgone by spending time in school instead of working for pay.
D) The cost of books and fees.

Question 25

An additional worker will add to the profit of a business,and therefore be more likely to be hired,if the

A) average cost of labor is positive.
B) marginal revenue is less than the price of the output of the business.
C) wage is less than the marginal revenue.
D) marginal cost of labor is greater than the marginal revenue.

Question 26

Which of the following statements about an effective minimum wage is true?

A) A minimum wage shifts the demand curve for labor to the right.
B) A minimum wage shifts the supply curve for labor to the right.
C) A minimum wage tends to create unemployment among unskilled workers.
D) Increasing the minimum wage makes it easier for unskilled workers to find jobs.

Question 27

The labor pool effect of globalization has which of the following effects?

A) The overall number of workers employed falls.
B) The labor force participation rate declines.
C) The supply of labor for many kinds of work increases, pushing the equilibrium wage down.
D) The demand for labor for many kinds of work increases, pushing the equilibrium wage up.

Question 28

Which of the following statements about education and the unemployment rate is true?

A) People with more education tend to have higher unemployment rates because employers hiring at that level tend to be more selective.
B) The unemployment rate tends to be higher for people with less education.
C) Unemployment rates are virtually the same for groups with different education levels.
D) People with more education tend to have higher unemployment rates because it typically takes a longer period of time to find a more specialized job requiring a higher level of skill.

Question 29

Which of the following is true about states that have passed "right-to-work" laws?

A) It is illegal in those states for employers to lay off workers who have been employed for longer than five years or who are within five years of retirement age.
B) Employees in those states are guaranteed a job at all times and will therefore be provided a job by the state government if they remain unemployed after 12-16 weeks (depending on the state).
C) Employees in those states cannot be compelled to join a union.
D) It is illegal in those states for employers to turn down an application for a job if the applicant is qualified.

Question 30

Which of the following could increase the quantity of workers employed in the labor market?

A) A leftward shift in the labor supply curve.
B) A decrease in the demand for labor.
C) An increase in the minimum wage.
D) An increase in the demand for labor.

Question 31

Which of the following statements about the long-term labor supply is FALSE?

A) The growth rate of the working-age population has been declining since 1980.
B) Technology changes, such as the introduction of air conditioning in the mid-20^th century, can have an impact on regional labor supply.
C) Immigration provides an insignificant proportion of the overall growth of the workforce.
D) Programs funded by payroll taxes, such as Social Security and Medicare, face problems from a slowdown in the growth of the working-age population.

Question 32

The market expansion effect of globalization has which of the following effects?

A) The overall number of workers employed falls.
B) The labor force participation rate declines.
C) The supply of labor for many kinds of work increases, pushing the equilibrium wage down.
D) The demand for labor for many kinds of work increases, pushing the equilibrium wage up.

Question 33

Employees who are members of a union can expect

A) a wage that is higher than the equilibrium wage in the labor market.
B) less job security.
C) poorer working conditions as employers try to compensate for higher wages by reducing benefits.
D) lower wages than nonunion workers in the same industry.

Question 34

As U.S.companies gain better access to growing overseas markets,

A) the demand for labor will increase, increasing the equilibrium wage.
B) the supply of labor will decrease, increasing the equilibrium wage.
C) the most highly-educated American workers have suffered from the competition.
D) American firms find they are suffering because they now must incur the higher costs of shipping to overseas customers.

Question 35

If the government passes legislation shortening the workweek from 40 hours to 35 hours,with overtime pay required for more than 35 hours,which of the following would occur?

A) Employers would face lower labor costs because they would save five hours a week of wages.
B) Employers would face higher labor costs because they would have to pay overtime or train more workers to get the same quantity of work done.
C) The demand for labor hours would increase.
D) The supply of labor would decrease.

Question 36

Unions will be more successful where

A) it is easy for competitors to enter the industry.
B) globalization is less extensive.
C) the state government has passed a "right-to-work" law.
D) it is easy for the company to hire replacement workers.

Question 37

Which of the following best describes the "education premium"?

A) The added benefits for society as a whole from a person getting a higher level of education.
B) The added pay for getting a higher level of education.
C) The added cost of getting a higher level of education.
D) The increase in average wages, in inflation-adjusted dollars, over time.

Question 38

Students who go to college when they are younger face a lower opportunity cost of education because

A) wages are lower for younger people, so they are giving up less in earnings when they spend time in school.
B) younger people are willing to live at a lower standard of living with less expensive housing and other goods.
C) younger people find it easier to learn, so going to college does not take as much effort as it does for someone who is older.
D) younger people can borrow money for college, and older people cannot.

Question 39

Which of the following individuals would be likely to face the lowest opportunity cost of a college education?

A) A high school basketball star who is offered a multimillion-dollar contract with the NBA, as well as a full scholarship at the university of his choice.
B) A high school graduate who has few skills, does not qualify for a full scholarship, and would be able to work as a server at her family's restaurant if she did not go to college.
C) The 40-year-old owner of a successful construction company who wants to finish college as an example to his children.
D) A well-paid staff member at a college who can take classes for free.

Question 40

Which of the following statements about education and wage rates is true?

A) People with four-year college degrees tend to earn considerably more than those with advanced degrees.
B) Inflation-adjusted earnings for people with four-year college degrees have fallen over the last 30 years.
C) People who are high school graduates with no college education have seen virtually no increase in inflation-adjusted earnings in the last 30 years.
D) While people with high school degrees have had almost no increase in real wages in 30 years, those with college or advanced degrees have had significant increases in pay.

Question 41

$$\begin{array}{l}\begin{array} { | c | c | } \hline \text { Number of Employees } & \text { Total Output } \\\hline 1 & 6 \\\hline 2 & 11 \\\hline 3 & 15 \\\hline 4 & 18 \\\hline 5 & 20 \\\hline\end{array}\\\text { Table } 16.2\end{array}$$ Table 16.2 gives the number of oil changes that can be performed at a local oil change business based on the number of employees hired.If the price of an oil change is $20,and workers get paid $90 per day,how many workers should the business hire?

A) One.
B) Two.
C) Three.
D) Four.

Question 42

If the labor pool effect of globalization is stronger than the market expansion effect,then globalization will lead to a(n)__________ in wages and a(n)__________ in the number of workers hired.

A) decrease; decrease
B) decrease; increase
C) increase; increase
D) increase; decrease

Question 43

Which of the following is typically a result of government licensing requirements?

A) Competition in the licensed occupation is reduced.
B) Wages in the licensed occupation fall.
C) People in the industry begin to work longer hours and receive lower benefits.
D) The number of people working in the industry increases.

Question 44

If the labor pool effect of globalization is equal in strength to the market expansion effect,then globalization will lead to __________ in wages and __________ in the number of workers hired.

A) no change; a decrease
B) a decrease; no change
C) no change; an increase
D) an increase; no change

Question 45

The labor demand curve tells us

A) the marginal revenue created by an additional worker.
B) how many workers the firm will want to hire, given the wage.
C) the additional revenue created by an additional worker, minus the wage that must be paid to that worker.
D) the marginal product created by an additional worker, times the wage.

Question 46

In 2010,the unemployment rate among workers with a bachelor's degree or higher was

A) 9.2 percent.
B) 7.0 percent.
C) 4.7 percent.
D) 2.1 percent.

Question 47

$\text { Happy Tots Child Care }$
$\text { Units of Labor per }~~\text { Output per Week }~~\text { Marginal Product }\\Week~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~per ~Week\\\begin{array}{|c|c|c|}\hline ~~~~~~~~~~~~~~~1~~~~~~~~~~~~~~~~~ & ~~~~~~~~4 ~~~~~~~~~& ~~~~~~~4~~~~~~~~ \\\hline 2 & 9 & 5 \\\hline 3 & 13 & 4 \\\hline 4 & 16 & 3 \\\hline 5 & 18 & 2 \\\hline\end{array}$
Price of a unit of output: $\$ 150$ per week.
Cost to Happy Tots of hiring one more unit of labor: $\$ 400$ per week.
Table 16.1 Refer to Table 16.1.What is the marginal revenue of the third unit of labor?

A) $300.
B) $450.
C) $600.
D) $1,200.

Question 48

$$\begin{array}{l}\begin{array} { | c | c | } \hline \text { Number of Employees } & \text { Total Output } \\\hline 1 & 6 \\\hline 2 & 11 \\\hline 3 & 15 \\\hline 4 & 18 \\\hline 5 & 20 \\\hline\end{array}\\\text { Table } 16.2\end{array}$$ Table 16.2 gives the number of oil changes that can be performed at a local oil change business based on the number of employees hired.If the price of an oil change is $20,and workers get paid $150 per day,how many workers should the business hire?

A) Zero.
B) One.
C) Two.
D) Three.

Question 49

Suppose the government changes the tax code so that it is much simpler-there are fewer rules,fewer deductions,and fewer calculations to perform.Describe,using a supply and demand diagram,what would happen in the market for tax accountants.

Question 50

$$\begin{array}{l}\begin{array} { | c | c | } \hline \text { Number of Employees } & \text { Total Output } \\\hline 1 & 6 \\\hline 2 & 11 \\\hline 3 & 15 \\\hline 4 & 18 \\\hline 5 & 20 \\\hline\end{array}\\\text { Table } 16.2\end{array}$$ Table 16.2 gives the number of oil changes that can be performed at a local oil change business based on the number of employees hired.If the price of an oil change is $20,and workers get paid $90 per day,which of the following is equal to 3?

A) The marginal revenue of the third employee.
B) The optimal number of employees to hire.
C) The marginal product of the fourth employee.
D) The marginal cost of the first oil change.

Question 51

If the adult population in the United States was 225 million people and 150 million of those people were in the labor force,the labor force participation rate would be

A) 67 percent.
B) 150 percent.
C) 33 percent.
D) 40 percent.

Question 52

Use the table below to answer the question that follows.
Claire's Pool Service Price of a unit of output: $80.
Cost to Claire's Pool Service of hiring one more unit of labor: $300 per week.
Fill in the marginal revenue column,and tell how many units of labor Claire will hire (assuming she has to hire whole units of labor,not fractions).

Question 53

$$\begin{array}{l}\begin{array} { | c | c | } \hline \text { Number of Employees } & \text { Total Output } \\\hline 1 & 6 \\\hline 2 & 11 \\\hline 3 & 15 \\\hline 4 & 18 \\\hline 5 & 20 \\\hline\end{array}\\\text { Table } 16.2\end{array}$$ Table 16.2 gives the number of oil changes that can be performed at a local oil change business based on the number of employees hired.If the price of an oil change is $20,what is the marginal revenue of the third employee?

A) $80.
B) $360.
C) $5.
D) $40.

Question 54

If an extra worker allows a child care center to care for an extra nine children a week,the weekly price of child care per child is $200,and the other workers are all paid wages and benefits totaling $500 per week,then the marginal revenue of that additional worker is

A) $4,500 per week.
B) $2,700 per week.
C) $1,800 per week.
D) The answer cannot be determined from the information provided.

Question 55

Complete the table below.
Phil's Lawn Care Price of a unit of output: $40.
Cost to Phil's Lawn Care of hiring one more unit of labor: $300 per week.

Question 56

If technology is a complement to labor,then advances in technology will __________ the number of workers hired.

A) increase
B) not affect
C) act as a substitute for
D) decrease

Question 57

Between 2005 and 2010,the increase in the foreign-born labor force was

A) about equal to the increase in the native-born labor force.
B) about twice as large as the increase in the native-born labor force.
C) about half as large as the increase in the native-born labor force.
D) the only source of labor-force growth.

Question 58

In what year did the federal government pass rules to set a 40-hour workweek?

A) 1886.
B) 1938.
C) 1979.
D) The federal government has never done this.

Question 59

$\text { Happy Tots Child Care }$
$\text { Units of Labor per }~~\text { Output per Week }~~\text { Marginal Product }\\Week~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~per ~Week\\\begin{array}{|c|c|c|}\hline ~~~~~~~~~~~~~~~1~~~~~~~~~~~~~~~~~ & ~~~~~~~~4 ~~~~~~~~~& ~~~~~~~4~~~~~~~~ \\\hline 2 & 9 & 5 \\\hline 3 & 13 & 4 \\\hline 4 & 16 & 3 \\\hline 5 & 18 & 2 \\\hline\end{array}$
Price of a unit of output: $\$ 150$ per week.
Cost to Happy Tots of hiring one more unit of labor: $\$ 400$ per week.
Table 16.1 Refer to Table 16.1.Suppose the cost of child care workers (units of labor)is the only cost the firm faces.How many units of labor would the firm need to hire to maximize profit?

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

Question 60

If the labor pool effect of globalization is weaker than the market expansion effect,then globalization will lead to a(n)__________ in wages and a(n)__________ in the number of workers hired.

A) decrease; decrease
B) decrease; increase
C) increase; increase
D) increase; decrease

Question 61

What effects will globalization have on labor demand? What will happen to wages of U.S.workers as more foreign trade occurs?

Question 62

Why do college-educated workers get paid more than those without a college education? Provide at least two reasons,using economic reasoning.