Deck 10: Labor Markets, Income Distribution, and Poverty

Question 1

A decrease in the price of a firm's output will shift the firm's demand curve for labor to the right, other things being equal.

Answer 1

False

Question 2

Labor unions create barriers to entry in certain work settings.

Answer 2

True

Question 3

Other things being equal, if the quantity of labor supplied is less than the quantity of labor demanded, wages will tend to fall.

Answer 3

False

Question 4

Other things being equal, an increase in labor productivity will shift the labor supply curve to the right.

Question 5

The salaries of college professors are partly determined by the demand for college education.

Question 6

The marginal resource cost of input is the amount that an extra unit of that input adds to the firm's total costs.

Question 7

As more workers are hired to harvest grapes in a vineyard, the fields become overcrowded.As a result, the marginal product of labor is likely to diminish.

Question 8

In the last 60 years, the percentage of workers in union jobs has increased substantially.

Question 9

The marginal resource cost is the amount by which an additional unit of input decreases the firm's variable costs.

Question 10

The demand for cake decorators has no relationship to the demand for cakes.

Question 11

The concept of derived demand indicated that the demand for a final good or service will be determined by the price of the inputs used to produce that final good or service.

Question 12

Increases in income from sources other than employment can cause the labor supply curve to shift to the left.

Question 13

While unions represent only a fraction of the unskilled workers in the U.S.labor market, any wage increase won by unionized workers is most likely shared with non-union unskilled workers.

Question 14

The additional revenue a firm obtains from hiring one more unit of input is called the marginal revenue product.

Question 15

If the demand for opera singers increases faster than the supply, wages will rise.

Question 16

The law of diminishing marginal product is a reason why the demand curve for labor is downward sloping.

Question 17

An increase in the price of a firm's output will shift the firm's demand curve for labor to the right, other things being equal.

Question 18

The intersection of the market demand for labor and the market supply for labor determines the equilibrium wage rate.

Question 19

The demand for labor is derived from the demand for final goods which that labor is used to produce.

Question 20

A decrease in the productivity of labor will shift the demand curve for labor to the left, other things being equal.

Question 21

Which of the following best illustrates the concept of "derived demand"?

A)An increase in the wages of autoworkers leads to an increase in the demand for robots in automobile factories.
B)An auto firm decides to supply more minivans when there is a decrease in the demand for station wagons.
C)An increase in the price of gasoline leads to an increase in the demand for small cars.
D)An automobile firm faces an increase in the demand for cars it supplies to the market, which leads to an increase in the demand for autoworkers.

Question 22

Individuals who are workaholics tend to have higher incomes than individuals who are not.

Question 23

The price of any productive resource is ____ related to ____ the final good or service:

A)inversely; demand for
B)directly; demand for
C)directly; supply of
D)not; supply of

Question 24

Since the 1980s, the share of measured income received by the lowest fifth of families has risen.

Question 25

Which of the following statements are true regarding profit-maximizing firms?

A)They will attempt to maximize the difference between total revenues and total costs.
B)They will use more of a resource as long as the MRC is greater than the MRP.
C)They will only produce where MRP is positive and MRC is negative.
D)none of the above.

Question 26

Demand for inputs is a derived demand because:

A)it is derived from the need for income.
B)it corresponds to the derived supply of the inputs.
C)the demand for output leads producers to demand inputs used to produce finished goods.
D)of the diminishing marginal product of inputs.

Question 27

Most Americans experience significant fluctuations in their economic well-being from one year to the next.

Question 28

Paul, a worker whose income currently places him among the poorest 20 percent of Americans, is more likely than not to remain in that lowest quintile for the next decade.

Question 29

Many economists conclude that in-kind income programs have served to increase levels of inequality significantly from the levels suggested by aggregate income statistics.

Question 30

Approximately ____ of national income is compensation received by owners of land, capital, and entrepreneurial skills.

A)10 percent
B)25 percent
C)40 percent
D)50 percent
E)75 percent

Question 31

If we consider age distribution, institutional factors, and in-kind transfer programs, income distribution is likely considerably more unequal than it appears from measured income.

Question 32

Many economists conclude that in-kind income programs have served to reduce levels of inequality significantly from the levels suggested by aggregate income statistics.

Question 33

Police officers earn higher wages because of the dangers associated with their profession.

Question 34

At any moment in time, middle-age people tend to have higher incomes than both younger and older people do.

Question 35

When labor is a firm's only variable input in its production process, a profit-maximizing firm will continue to employ additional workers as long as:

A)the marginal product of labor > 0.
B)the marginal revenue product of labor < the marginal resource cost.
C)the marginal revenue product of labor > the marginal resource cost.
D)none of the above.

Question 36

Approximately ____ of national income goes to wages and salaries for labor services.

A)90 percent
B)75 percent
C)60 percent
D)45 percent
E)25 percent

Question 37

Union workers earn approximately 15 percent more than otherwise identical non-union workers do.

Question 38

If the demand for softballs increases, one could expect the demand for leather to increase.This is due to the:

A)principle of diminishing marginal product.
B)change in the opportunity cost of producing a softball.
C)reduction in the cost of producing softballs.
D)demand for an input being a derived demand.

Question 39

Income inequality is greater within nations than among nations.

Question 40

If substantial income mobility is present, then there is considerable movement of individuals up and down the income ladder when income comparisons are made at different points in time.

Question 41

The marginal product of labor measures:

A)the total amount of output produced by all workers combined.
B)the quantity of an intermediate product that is combined with labor to produce output.
C)the amount of output an individual worker contributes to a firm's total output.
D)the average productivity of workers hired by a firm.
E)none of the above.

Question 42

The profit-maximizing firm should lay off workers when:

A)MRC < MRP.
B)MRC > MRP.
C)MRC = MRP.
D)the MP of labor begins to diminish.

Question 43

The demand for labor of a perfectly competitive producer:

A)is perfectly elastic at the going wage rate.
B)is downward sloping because prices fall when the producer increases output.
C)is downward sloping because of diminishing marginal productivity.
D)is downward sloping because prices fall when the producer increases output and because of diminishing marginal productivity.
E)is downward sloping because of diminishing marginal utility.

Question 44

Bob's Baubles, Inc., sells its product for $3 each in a perfectly competitive market.If it increases its workforce from 1,000 to 1,001, its output goes from 615 to 625 per day.Its marginal revenue product for the 1,001^st worker is:

A)$3.
B)$1, 845.
C)$30.
D)$3,003

Question 45

A worker's contribution to the firm's revenue is measured directly by the worker's:

A)value of marginal product.
B)marginal product multiplied by his/her wage.
C)marginal product minus his/her wage.
D)contribution to total output.

Question 46

Which of the following most clearly illustrates the concept of "derived demand"?

A)An increase in the price of steak causes the demand for poultry to increase.
B)An increase in the demand for new houses leads to an increase in the demand for construction workers.
C)An increase in consumer income leads to an increase in the demand for services provided by the government.
D)An increase in the demand for new cars causes the demand for used automobiles to rise.

Question 47

If the demand for the output produced by a firm's laborers increased, it would

A)increase the firm's demand for labor.
B)increase the quantity of labor demanded by the firm.
C)decrease the firm's demand for labor.
D)decrease the quantity of labor demanded by the firm.

Question 48

If there is an increase in demand for a good,

A)there will be an increase in demand for the inputs that produce it.
B)there will be a decrease in demand for the inputs that produce it.
C)there will be an increase in supply of the inputs that produce it.
D)there will be a decrease in supply of the inputs that produce it.

Question 49

The demand for labor is a derived demand.Employers hire workers until the:

A)wage rate equals the average product of labor.
B)wage rate equals the marginal revenue product of labor.
C)last worker hired adds nothing to total output.
D)average product of labor is zero.
E)marginal product of labor is zero.

Question 50

The profit-maximizing firm should continue hiring additional labor as long as:

A)MRC < MRP.
B)MRC > MRP.
C)MRC = MRP.
D)the MP of labor > 0.

Question 51

Bob's Baubles, Inc., sells its product for $3 each in a perfectly competitive market.If it increases its workforce from 1,000 to 1,001, its output goes from 615 to 625 per day.Bob should hire the 1,001^st worker only if:

A)the wage is more than $30 per day.
B)the wage is $30 or less per day.
C)the wage is less than $10 per day.
D)the wage is less than $3 per day.

Question 52

Lower wages will

A)decrease the demand for labor.
B)decrease the quantity of labor demanded.
C)increase the demand for labor.
D)increase the quantity of labor demanded.

Question 53

For a firm that is competitive in both product and factor markets, the value of the marginal revenue product of labor:

A)is constant and equal to the market wage.
B)increases, causing the labor supply curve to slope upward.
C)declines because the marginal product of labor diminishes as the number of workers rises.
D)declines because a competitive firm must lower product price in order to increase sales.

Question 54

Which of the following would cause the demand for carpenters to increase?

A)a decrease in immigration
B)an increase in the demand for housing
C)an increase in the price of lumber
D)a decrease in the productivity of carpenters

Question 55

When a firm evaluates the contribution of a worker to its ____, it must calculate the worker's contribution to revenue, minus the worker's ____.

A)profits; wage
B)output; wage
C)profits; marginal productivity
D)output; marginal productivity

Question 56

The relationship between the wage rate and the quantity of labor that employers wish to hire is called:

A)the market supply curve for labor.
B)the market demand curve for labor.
C)an individual demand curve for labor.
D)an individual supply curve for labor.
E)the market demand curve for output.

Question 57

If labor is the only variable input, an additional worker increases output from 72 to 78 units, and the product price is $6, the marginal revenue product from an additional worker:

A)is $6.
B)is $36.
C)is $78
D)is $432.
E)is $468.

Question 58

The major reason the market demand curve for labor slopes downward is because:

A)at lower wage rates, workers are less willing to supply labor to the market.
B)at lower wage rates, workers are more willing to supply labor to the market.
C)of the law of diminishing marginal product.
D)of the law of diminishing marginal resource cost.

Question 59

The demand curve for labor slopes downward because:

A)few workers are willing to work at low wages.
B)capital has been substituted for labor in most industries.
C)of the diminishing marginal product of labor.
D)of all of the above.

Question 60

When a profit-maximizing firm makes a decision to employ a worker, that decision is based on:

A)the individual contribution that the worker makes to the profit of the firm.
B)the average productivity of the firm's labor force.
C)the familial relationship between the employer and the employee.
D)the total output produced by the firm.

Question 61

Based on the table below, how many workers will the firm employ in order to maximize profits? $$\begin{array} { c c c c } \text { Workers } & \text { Output } & \text { Praduct Price } & \text { Wage Rate } \\\hline 1 & 40 & \$ 14 & \$ 500 \\2 & 90 & \$ 14 & \$ 500 \\3 & 160 & \$ 14 & \$ 500 \\4 & 230 & \$ 14 & \$ 500 \\5 & 290 & \$ 14 & \$ 500 \\6 & 340 & \$ 14 & \$ 500 \\7 & 380 & \$ 14 & \$ 500\end{array}$$

A)4
B)5
C)6
D)7
E)8

Question 62

If labor demand rises faster than labor supply, it is expected that real wages will ____.

A)stay the same
B)decrease
C)increase
D)Not enough information is available to determine the impact on real wage rates.

Question 63

An individual firm in a perfectly competitive labor market faces:

A)a downward sloping labor demand curve and an upward sloping labor supply curve.
B)a horizontal labor supply curve and a vertical labor demand curve.
C)a horizontal labor supply curve and a downward sloping labor demand curve.
D)an upward sloping labor supply curve and a horizontal labor demand curve.
E)a vertical labor supply curve and a horizontal labor demand curve.

Question 64

Which of the following would increase the demand for labor?

A)an increase in demand for the final product and an increase in the productivity of labor
B)an increase in demand for the final product and a decrease in the productivity of labor
C)a decrease in demand for the final product and an increase in the productivity of labor
D)a decrease in demand for the final product and a decrease in the productivity of labor

Question 65

Mr.Calhoun owned land on which cotton could be grown, but which he had been unable to rent for years.Suddenly he was getting offers from cotton farmers to lease his land.Which of the following best explains this change in circumstances?

A)The price of cotton decreased.
B)The price of cotton increased.
C)The productivity of the land increased.
D)Property taxes on the land increased.

Question 66

If an increase occurs in the demand for the output of industry A, we would expect all of the following to happen except:

A)an increase in the profits of industry A.
B)a decrease in prices of inputs used in the production of A.
C)an increase in the output of industry A.
D)an increase in the demand for inputs used in the production of A.

Question 67

The relationship between the wage rate and the quantity of labor that workers wish to supply is called:

A)the market supply curve for labor.
B)the market demand curve for labor.
C)an individual demand curve for labor.
D)an individual supply curve for labor.
E)the market demand curve for output.

Question 68

Which of the following will not contribute to higher wage rates for labor?

A)increased unionization and decreased nonunionization of employees in the economy
B)a rapid increase in the demand for labor
C)significantly relaxed immigration standards
D)increases in technological advances

Question 69

A decrease in the demand for the output that an input produces will cause the input's:

A)supply curve to shift to the right.
B)supply curve to shift to the left.
C)demand curve to shift to the right.
D)demand curve to shift to the left.

Question 70

The market supply curve for labor:

A)shows the relationship between the wage rate and the number of employees firms are willing to hire.
B)shows the relationship between the price of output and the number of employees firms are willing to hire.
C)shows the relationship between the wage rate and the quantity of labor that workers are willing to supply.
D)shows the relationship between the price of output and the quantity of labor that workers are willing to supply.

Question 71

Based on the table below, how many workers will the firm employ in order to maximize profits? $$\begin{array} { c c c c } \text { Workers } & \text { Output } & \text { Product Price } & \text { Wage Rate } \\\hline 10 & 400 & \$ 20 & \$ 450 \\11 & 450 & \$ 19 & \$ 450 \\12 & 505 & \$ 18 & \$ 450 \\13 & 555 & \$ 17 & \$ 450 \\14 & 600 & \$ 16 & \$ 450 \\15 & 640 & \$ 15 & \$ 450 \\16 & 675 & \$ 14 & \$ 50\end{array}$$

A)12
B)13
C)14
D)15
E)16

Question 72

Other things being equal, a ____ supply of workers tends to ____ real wages.

A)larger; decrease
B)smaller; decrease
C)larger; increase
D)smaller; not change
E)larger; not change

Question 73

Based on the table below, how many workers will the firm employ in order to maximize profits? $$\begin{array} { c c c c } \text { Workers } & \text { Output } & \text { Product Price } & \text { Wage Rate } \\\hline 12 & 5,000 & \$ 2 & \$ 725 \\13 & 5,450 & \$ 2 & \$ 725 \\14 & 5,875 & \$ 2 & \$ 725 \\15 & 6,275 & \$ 2 & \$ 725 \\16 & 6,650 &\$2 &\$ 725 \\17 & 7,000 & \$ 2 & \$ 725 \\18 & 7,325 & \$ 2 & \$ 725\end{array}$$

A)14
B)15
C)16
D)17
E)18

Question 74

Which of the following does not contribute to increased worker productivity?

A)technological advances
B)increased capital formation
C)improvements in workers' skills
D)increased labor supply

Question 75

Which of the following will contribute to higher wage rates for labor?

A)increased productivity
B)increases in capital formation
C)a decrease in the supply of labor
D)increased marginal productivity of labor
E)all of the above

Question 76

Based on the table below, how many workers will the firm employ in order to maximize profits? $$\begin{array}{l}\begin{array} { c c c c } \text { workers } & \text { Output } & \text { Product Price } & \text { Wage Rate } \\\hline 8 & 100 & \$ 28 & \$ 375 \\9 & 130 & \$ 28 & \$ 400 \\10 & 162 & \$ 28 & \$ 425 \\11 & 192 & \$ 28 & \$ 450 \\12 & 220 & \$ 28 & \$ 475 \\13 & 246 & \$ 28 & \$ 500 \\14 & 270 & \$ 28 & \$ 25\end{array}\end{array}$$

A)10
B)11
C)12
D)13
E)14

Question 77

If the demand for software engineers ____ more slowly than does supply, wages of software engineers will ____.

A)increases; remain constant
B)increases, rise
C)increases; fall
D)decreases; fall
E)none of the above

Question 78

Which of the following will not result in a leftward shift of the market demand curve for labor?

A)a decrease in labor productivity
B)a decrease in demand for the firm's product
C)an increase in the wage rate
D)a decrease in the firm's product price

Question 79

A productivity slowdown could result from

A)an increase in capital formation.
B)an increase in the number of unskilled and inexperienced workers.
C)a decrease in the relative size of the service sector.
D)any of the above.
E)none of the above.

Question 80

If in an industry with one variable input, the marginal product of the input doubled and the output price fell in half, the demand for the input would:

A)be four times its previous level.
B)be two times its previous level.
C)be the same as its previous level.
D)be one half its previous level.
E)be one fourth its previous level.