Question 1

When manufacturing a car, parts must be soldered together. This work can be done by labor or by a robot (capital). More robots will be hired when the price of labor increases. This is known as

Accepted Answer

The scenario describes the substitution effect, where a producer will substitute one factor of production (labor) with another when its price increases (in this case, replacing labor with robots).

Question 2

The demand for DVD's increases. As a result,

Accepted Answer

The answer of The demand for DVD's increases. As a...

Question 3

In the perfectly competitive market, the labor supply curve faced by the individual firm is ________, while that of the market is ________.

Accepted Answer

In a perfectly competitive market, the labor supply curve faced by an individual firm is perfectly elastic because the firm can hire as much labor as it wants at the market wage. The market labor supply curve is upward sloping, indicating that as wages increase, more labor is supplied to the market.

Question 4

Suppose the market for autoworkers is initially in equilibrium, but then the demand for automobiles increases and simultaneously the automakers allow autoworkers workers less flexibility working at the plants. What happens in the market for autoworkers?

Accepted Answer

The answer of Suppose the market for autoworkers is initially...

Question 5

Suppose the market for autoworkers is initially in equilibrium, but then the automakers purchase capital goods that are a substitute for workers. What happens in the market for autoworkers?

Accepted Answer

The purchase of capital goods that are a substitute for workers will increase the demand for capital goods and decrease the demand for labor. This decrease in demand for labor will lead to a decrease in the equilibrium wage rate and the equilibrium quantity of labor.

Question 6

Which of the following will not lead to an increase in the demand for labor for a firm producing automobiles?

Accepted Answer

The answer of Which of the following will not lead...

Question 7

An increase in the supply of labor to an industry could be caused by

Accepted Answer

An increase in job flexibility in the industry would make it easier and more appealing for people to enter the labor force in that industry, thus increasing the supply of labor. Higher wages or increased productivity of labor may attract more workers in the short term, but in the long run, they may also lead to a decrease in the supply of labor as workers become more expensive to hire or fewer workers are needed due to increased productivity. An increase in wages in another industry may attract some workers to switch to that industry, but it would not necessarily increase the overall supply of labor to the industry in question.

Question 8

Suppose the market for pizza makers is initially in equilibrium, but then the equilibrium wage rate and the equilibrium quantity of labor both increased. What happened in the market for pizza makers?

Accepted Answer

If both the equilibrium wage rate and quantity of labor have increased, it indicates an increase in demand for pizza makers, as employers are willing to pay more to hire additional workers. This could be due to factors such as an increase in pizza consumption, expansion of pizza restaurants, or a decrease in the supply of pizza makers.

Question 9

Suppose firms in an industry hire unskilled labor and skilled labor. Unskilled labor is a substitute for capital and skilled labor is a complement with capital. A decrease in the real price of capital would

Accepted Answer

When the real price of capital decreases, firms are more likely to substitute capital for unskilled labor (since they are substitutes), decreasing the demand for unskilled labor. Conversely, because skilled labor is a complement to capital, the demand for skilled labor would increase, leading to a relative wage decrease for unskilled labor compared to skilled labor.

Question 10

Suppose the market for pizza makers is initially in equilibrium, but then the equilibrium wage rate increased and the equilibrium quantity of labor will decreased. What happened in the market for pizza makers?

Accepted Answer

The increase in the equilibrium wage rate along with a decrease in the equilibrium quantity of labor suggests that the supply of pizza makers decreased. This is because a decrease in supply, with demand remaining constant, would lead to higher prices (wages, in this case) and lower quantities.

Question 11

Coal and iron ore are complements in the manufacture of steel. An increase in the price of coal would lead to

Accepted Answer

Since coal and iron ore are complements in the production of steel, an increase in the price of coal would likely lead to a decrease in steel production due to higher costs. This, in turn, would reduce the demand for iron ore, as less of it would be needed for steel production.

Question 12

An increase in demand for DVD machines occurs. Which of the following statements is true for individual firms that produce DVD machines?

Accepted Answer

An increase in demand for DVD machines will lead to an increase in the price of DVD machines, as there is now a greater demand for the product. This increase in price will lead to an increase in revenue for the firm, which will in turn lead to an increase in the demand for labor. Therefore, the correct answer is B. A decrease in demand of DVD machines would lead to a decrease in the demand for labor by the firm, but this is not the scenario presented in the question. Option A is incorrect because the price of DVD machines will increase, not decrease. Option C is incorrect because an increase in demand for DVD machines would not lead to a decrease in demand for labor. Option D is incorrect because a change in demand at the industry level can influence an individual firm's demand curve for labor.

Question 13

A single firm in a competitive labor market has a labor supply curve that is

Accepted Answer

In a competitive labor market, a single firm faces a labor supply curve that is perfectly elastic. This is because the firm can hire as many workers as it needs at the market wage rate without affecting the wage rate itself.

Question 14

Suppose the market for autoworkers is initially in equilibrium, but then suppose the automakers improve working conditions at the plants. What happens in the market for autoworkers?

Accepted Answer

The answer of Suppose the market for autoworkers is initially...

Question 15

Which of the following will not lead to a change in the demand for labor?

Accepted Answer

A change in the supply of labor would directly affect the quantity of labor demanded, but none of the other choices directly relate to the demand for labor. A change in the demand for the final good (choice A) may indirectly affect labor demand as businesses adjust production to meet consumer demand, but it is not a direct determinant. A change in the price of a substitute input (choice C) may affect the relative costs of different inputs, but it is not a direct factor affecting labor demand. A change in labor productivity (choice D) may indirectly affect labor demand, as higher productivity would increase the demand for labor in order to produce more output, but it is not a direct determinant either.

Question 16

Absent government interference, the wage rate for labor in a competitive market is established

Accepted Answer

In a competitive market, the wage rate for labor is established by the intersection of market supply and market demand for labor. At this point of intersection, the quantity of labor supplied equals the quantity of labor demanded, and this determines the equilibrium wage rate. Therefore, both the demand for and supply of labor at each individual firm are taken into account in establishing the equilibrium wage rate in the overall labor market.

Question 17

In a perfectly competitive labor market, the wage rate paid by the individual firm is

Accepted Answer

In a perfectly competitive labor market, firms are price-takers and have no influence on the market wage rate. Therefore, the wage rate paid by the individual firm is the equilibrium market wage rate, where the supply of labor equals the demand for labor. Thus, choice A is the correct answer. Choices B, C, and D are incorrect as they do not accurately describe the wage rate determination in a perfectly competitive labor market.

Question 18

A decrease in the supply of labor could be caused by

Accepted Answer

If wage rates increase in another industry, workers may switch to that industry, leading to a decrease in the supply of labor in the original industry.

Question 19

Ajax Corporation has just decided to let managers work from home one day a week. This decision will make working conditions better and will

Accepted Answer

Allowing managers to work from home would make the job more attractive and increase the incentive for people to enter or stay in the labor market as managers. This would increase the supply of available labor for managers.

Question 20

Which of the following will not cause the supply of labor curve to shift in the economics professor industry?

Accepted Answer

The answer of Which of the following will not cause...

Quiz 28: The Labor Market: Demand, Supply and Outsourcing

When manufacturing a car, parts must be soldered together. This work can be done by labor or by a robot (capital) . More robots will be hired when the price of labor increases. This is known as