Deck 18: Labor Markets

Question 1

The marginal product of labor is:

A) the additional output produced by an extra worker.
B) the increase in costs borne by the firm when one extra worker is hired.
C) always greater than the wage earned by one additional worker.
D) the increase in firm revenue when an additional worker is employed.

Answer 1

D

Question 2

Use the following to answer questions: Table: Sunshine Flower Vase Co. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Number of Workers } \\\text { Daily }\end{array} & \text { Total Revenue (\$) } \\\hline 3 & 1,350 \\\hline 4 & 1,580 \\\hline 5 & 1,760 \\\hline 6 & 1,885 \\\hline 7 & 1,965 \\\hline 8 & 2,015 \\\hline\end{array}$$

-(Table: Sunshine Flower Vase Co.) Refer to the table. If the market wage for each worker rose from $100 to $125 per day, how many workers would the firm hire?

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

Answer 2

6

Question 3

The increase in a firm's revenues created by hiring an additional worker is called:

A) marginal revenue.
B) marginal revenue of labor.
C) marginal product.
D) marginal product of labor.

Answer 3

D

Question 4

A firm will hire a worker as long as:

A) the marginal product of labor is greater than or equal to the wage earned by the worker.
B) the wage earned is greater than the marginal product of labor.
C) the worker is not unionized.
D) the worker does not demand OSHA safety regulations.

Question 5

Use the following to answer questions: Table: All-Stars $$\begin{array} { | c | c | } \hline \text { Number of All-Star } & \text { Marginal Product of Labor } \\\hline \text { Quality Pitchers } & \text { (MPL per season, millions) } \\\hline 1 & \$ 20 \\\hline 2 & 15 \\\hline 3 & 7 \\\hline 4 & 3 \\\hline 5 & 1 \\\hline 6 & 0.50 \\\hline\end{array}$$

-(Table: All-Stars) Refer to the table. A Major League Baseball team is considering increasing the quality of its pitching staff by hiring all-star quality pitchers. If the going salary for an all-star pitcher is $12 million per season, this team will hire ________ pitchers.

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

Question 6

The market demand curve for labor is based on the:

A) hiring preferences of firms.
B) elasticity of supply of labor.
C) elasticity of demand for labor.
D) marginal product of labor.

Question 7

A firm will hire workers as long as the marginal product of labor is:

A) greater than the wage.
B) equal to the wage.
C) less than the wage.
D) either greater than or less than the wage.

Question 8

A firm is willing to hire a worker when the marginal product of labor is:

A) greater than the wage.
B) less than the wage.
C) equal to or less than the wage.
D) efficient.

Question 9

To maximize profit, a firm will hire workers when the ________ in revenue from hiring an additional worker ________ the worker's wage.

A) decrease; is less than or equal to
B) decrease; is greater than
C) increase; is greater than
D) increase; is less than or equal to

Question 10

Use the following to answer questions: Table: Excellence Publishing $$\begin{array} { | c | c | } \hline \text { Number of Workers Per Year } & \text { Number of Books Edited Per Year } \\\hline 4 & 16,000 \\\hline 5 & 19,000 \\\hline 6 & 21,200 \\\hline 7 & 22,800 \\\hline 8 & 23,700 \\\hline 9 & 24,200 \\\hline\end{array}$$

-(Table: Excellence Publishing) Refer to the table. Each edited book sells for $50. How many people will the company hire per year as editing staff if the annual salary is $47,000 per staff member?

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

Question 11

Use the following to answer questions: Table: All-Stars $$\begin{array} { | c | c | } \hline \text { Number of All-Star } & \text { Marginal Product of Labor } \\\hline \text { Quality Pitchers } & \text { (MPL per season, millions) } \\\hline 1 & \$ 20 \\\hline 2 & 15 \\\hline 3 & 7 \\\hline 4 & 3 \\\hline 5 & 1 \\\hline 6 & 0.50 \\\hline\end{array}$$

-(Table: All-Stars) Refer to the table. A Major League Baseball team is trying to increase the quality of its pitching staff by hiring all-star quality pitchers. If the team hires three all-star pitchers, what is the going salary for an all-star pitcher?

A) more than $7 million per season
B) between $3 million and $7 million per season
C) less than $3 million per season
D) $42 million per season

Question 12

Use the following to answer questions: Table: Sunshine Flower Vase Co. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Number of Workers } \\\text { Daily }\end{array} & \text { Total Revenue (\$) } \\\hline 3 & 1,350 \\\hline 4 & 1,580 \\\hline 5 & 1,760 \\\hline 6 & 1,885 \\\hline 7 & 1,965 \\\hline 8 & 2,015 \\\hline\end{array}$$

-(Table: Sunshine Flower Vase Co.) Refer to the table. If there is competition from new immigrants that lowers the market wage for each worker from $100 to $70 per day, how many workers would the firm hire?

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

Question 13

Use the following to answer questions: Table: Sunshine Flower Vase Co. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Number of Workers } \\\text { Daily }\end{array} & \text { Total Revenue (\$) } \\\hline 3 & 1,350 \\\hline 4 & 1,580 \\\hline 5 & 1,760 \\\hline 6 & 1,885 \\\hline 7 & 1,965 \\\hline 8 & 2,015 \\\hline\end{array}$$

-(Table: Sunshine Flower Vase Co.) Refer to the table. If the market wage for each worker is $100 per day, how many workers will the company hire?

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

Question 14

Use the following to answer questions: Table: Excellence Publishing $$\begin{array} { | c | c | } \hline \text { Number of Workers Per Year } & \text { Number of Books Edited Per Year } \\\hline 4 & 16,000 \\\hline 5 & 19,000 \\\hline 6 & 21,200 \\\hline 7 & 22,800 \\\hline 8 & 23,700 \\\hline 9 & 24,200 \\\hline\end{array}$$

-(Table: Excellence Publishing) Refer to the table. Each edited book sells for $50. What is the marginal product of labor for the sixth worker?

A) $21,200
B) $110,000
C) $45,000
D) $2,200

Question 15

Use the following to answer questions: Table: Sunshine Flower Vase Co. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Number of Workers } \\\text { Daily }\end{array} & \text { Total Revenue (\$) } \\\hline 3 & 1,350 \\\hline 4 & 1,580 \\\hline 5 & 1,760 \\\hline 6 & 1,885 \\\hline 7 & 1,965 \\\hline 8 & 2,015 \\\hline\end{array}$$

-(Table: Sunshine Flower Vase Co.) Refer to the table. What is the marginal product of labor for the fifth worker?

A) $1,760
B) $135
C) $180
D) $1,580

Question 16

A firm will continue to hire workers as long as:

A) the marginal product of labor is greater than the wage.
B) the marginal product of labor is less than the wage.
C) the value of labor exceeds the firm's production costs.
D) the value of labor exceeds the firm's fixed costs of labor.

Question 17

Figure: Cleaners' Wages Refer to the figure. How many workers will this firm hire at a wage of $29?

A) 0
B) 1
C) 2
D) 3

Question 18

When wages decrease, firms will hire more workers who will be:

A) assigned to the most important tasks.
B) assigned to the least important tasks.
C) least likely to be laid off.
D) paid wages that are higher than market wages.

Question 19

Mariلn Hossa was paid $7.4 million by the Detroit Red Wings for the 2008-2009 season. We can conclude that:

A) Mariلn Hossa was overpaid.
B) the Red Wings expected Mariلn Hossa to increase the team's revenue by at least $7.4 million.
C) the marginal product of labor of Mariلn Hossa must be less than $7.4 million.
D) the marginal product of labor of Mariلn Hossa is 0.90 times the marginal cost.

Question 20

Which of the following statements is(are) TRUE?
I. The demand for labor is downward sloping.
II. The marginal product of labor declines as a firm hires more labor.
III. The marginal product of labor is the demand curve for labor.

A) I only
B) I and II only
C) III only
D) I, II, and III

Question 21

As more workers are hired, the marginal product of labor typically:

A) increases.
B) decreases.
C) remains the same.
D) oscillates more rapidly.

Question 22

Suppose that a public accounting firm plans to hire some accountants for tax season. What will happen to the marginal product of labor as the firm hires more and more accountants?

A) The marginal product of labor will increase because preparing tax returns requires high levels of education and experience.
B) The marginal product of labor will increase because completing and filing tax returns requires team production techniques.
C) The marginal product of labor will decline because each subsequent accountant that is hired will be assigned to work on less important (i.e., less lucrative) tax returns.
D) The marginal product of labor will not change because the practice of accounting is quite standardized, forcing all accountants to follow the uniform procedures set forth in federal tax law.

Question 23

Clark starts a coffee shop and begins hiring employees. The first employee's marginal product of labor (MPL) is $128 an hour and the MPL for each employee beyond the first adds half of the previous employee's ($64 for the second, $32 for the third, etc.). If the market wage for employees is $7 an hour, how many employees should Clark hire?

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

Question 24

If the marginal product of labor is decreasing in labor, then a market labor demand curve is:

A) positively sloped.
B) negatively sloped.
C) flat.
D) varied.

Question 25

As the wage for janitors falls, firms will demand:

A) more janitors.
B) fewer janitors.
C) a constant number of janitors.
D) no janitors.

Question 26

The marginal product of labor is:

A) the revenue created by a firm's entire workforce.
B) the revenue created by the average worker.
C) the increase in a firm's revenues created by hiring an additional laborer.
D) the decrease in a firm's revenues created by hiring an additional laborer.

Question 27

If we know the marginal product of labor for every unit of labor, we can derive:

A) the demand curve for labor.
B) the supply curve for labor.
C) the equilibrium wage.
D) the equilibrium quantity of workers.

Question 28

Figure: Marginal Product of Labor The firm in this figure will hire ______ worker(s) at a wage of $10 and 2 workers at a wage of _______.

A) 4; $18
B) 3; $15
C) 1; $6
D) 3; $17

Question 29

Use the following to answer questions: Table: Excellence Publishing $$\begin{array} { | c | c | } \hline \text { Number of Workers Per Year } & \text { Number of Books Edited Per Year } \\\hline 4 & 16,000 \\\hline 5 & 19,000 \\\hline 6 & 21,200 \\\hline 7 & 22,800 \\\hline 8 & 23,700 \\\hline 9 & 24,200 \\\hline\end{array}$$

-(Table: Excellence Publishing) Refer to the table. Initially each edited book sells for $50. Suppose that there is an increase in the demand for edited books, such that each edited book now sells for $70. How many people will the company hire per year as editing staff if the salary is $47,000 per staff member?

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

Question 30

Before the shipping container, cargo had to be removed from a ship piece by piece, a very time-consuming process requiring a lot of dockworkers to accomplish. The shipping container allows a single dockworker to accomplish what it took several workers to do by moving many pieces of cargo all at once. The West Coast Dockworkers' Union was concerned about the change and demanded compensation from an association of shipping companies resulting in the Mechanization and Modernization Agreement of 1961. But, if automation increased wages, which of the following best explains why the workers resisted change?

A) The shipping container would make their job more pleasant, resulting in smaller wages.
B) They were unionized.
C) The machines would require additional labor market issues to operate.
D) The least productive members were concerned about automation.

Question 31

The three-cylinder mill revolutionized sugar production around the year 1500, allowing sugar cane to be crushed rapidly using animal power (before then, the cane had to be ground by hand with a mortar-and-pestle). It took only three slaves to operate the machine, a small fraction of what it took to do the same job by hand. What happened to the price of slaves for sugar production?

A) It increased, because the marginal product of labor increased.
B) It decreased, because you needed fewer slaves to crush your sugar cane.
C) It stayed the same, because the factor from (a) balances out the factor from (b).
D) It decreased, because the marginal product of labor increased. .

Question 32

Firms will hire additional workers as long as:

A) the marginal revenue of that worker is greater than the worker's wage.
B) the total revenue is greater than the total cost.
C) the marginal cost of that worker is greater than the marginal revenue.
D) the marginal revenue of that worker is equal to the marginal product of labor.

Question 33

The general rule of hiring workers is to hire:

A) workers if their marginal product of labor is less than or equal to the wage.
B) workers if they contribute more to the firms' revenues than the firm's costs.
C) educated workers before noneducated workers.
D) the most productive workers, regardless of the wage.

Question 34

The marginal product of labor curve is the same as the:

A) marginal cost curve for labor.
B) wage curve for labor.
C) labor supply curve.
D) labor demand curve.

Question 35

Table: Stone Masons $\begin{array}{|l|r|}\hline \text { Number of Workers } & \text { MPL } \\\hline 1 & \$ 500 \\\hline 2 & 400 \\\hline 3 & 300 \\\hline 4 & 200 \\\hline 5 & 100 \\\hline\end{array}$ A construction company builds stone fireplaces. The market wage for a stonemason is $350 per day. The table depicts the marginal product of labor (MPL) per day for a given number of stonemasons. To maximize profits, this company should hire ______ stonemasons.

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

Question 36

Table: Mr. B's Restaurant $$\begin{array} { | r | r | } \hline \begin{array} { c } \text { Number of } \\\text { cooks }\end{array} & \begin{array} { c } \text { Increase in revenue } \\\text { from hiring an } \\\text { additional cook } \\\text { (per hour) }\end{array} \\\hline 1 & \$ 120 \\\hline 2 & 80 \\\hline 3 & 35 \\\hline 4 & 15 \\\hline\end{array}$$ The second column in this table shows the firm's ______. At a wage of $28 an hour, Mr. B should hire ______ cooks.

A) marginal disutility of work; 4
B) marginal product of labor; 3
C) marginal disutility of work; 2
D) marginal cost of labor; 3

Question 37

We often think of technology and labor as substitutes for each other, but technology can lead to the hiring of more labor if it:

A) decreases the average total cost of production.
B) decreases the compensating differential.
C) increases the marginal product of labor.
D) increases the opportunity cost of labor.

Question 38

Marginal product of labor typically ______ as more labor is hired.

A) increases
B) remains the same
C) declines
D) sometimes increases, sometimes remains the same, and sometimes declines

Question 39

A firm will hire a worker whenever that worker's marginal product of labor is:

A) greater than the marginal product of labor for the next best worker.
B) less than the marginal product of labor for the next best worker.
C) greater than the worker's wage.
D) less than the worker's wage.

Question 40

The ______ is derived from a marginal product of labor function.

A) supply of labor
B) demand for labor
C) minimum wage
D) salary cap

Question 41

A market labor supply curve:

A) is always positively sloped.
B) is always negatively sloped.
C) is always vertical.
D) can be positively sloped, vertical, or negatively sloped at different ranges.

Question 42

The market supply curve for labor:

A) slopes up.
B) slopes down.
C) is flat.
D) starts sloping up but may then bend back as wages rise.

Question 43

When labor supply decreases, the wage is expected to:

A) increase.
B) decrease.
C) remain the same.
D) change in an indeterminate direction.

Question 44

Which of the following is TRUE?
I. The market supply curve for labor can be upward sloping or downward sloping.
II. As wages increase, the market labor supply curve slopes upward because some people are willing to work more hours.
III. As wages increase in the health care industry, the market labor supply curve slopes upward because some workers from other industries decide to get jobs in health care.

A) I only
B) II only
C) I, II, and III
D) II and III only

Question 45

If higher wages give the incentive for some workers to work fewer hours:

A) the quantity of labor supplied in the market will fall.
B) the quantity of labor supplied in the market will still rise as new workers enter the market.
C) the MPL will fall.
D) the demand for workers will rise.

Question 46

If Bob's wages ______ and he works ______ hours, his labor supply curve slopes downward.

A) increase; fewer
B) increase; more
C) decrease; fewer
D) increase by 10%; 10% more

Question 47

If the marginal product of labor is decreasing in labor, then a firm-level labor demand curve is:

A) positively sloped.
B) negatively sloped.
C) flat.
D) varied.

Question 48

When labor demand decreases, the wage is expected to:

A) increase.
B) decrease.
C) remain the same.
D) change in an indeterminate direction.

Question 49

A single person's supply curve for labor slopes down when:

A) the person starts taking part of their income as leisure.
B) labor market issues increases beyond physical capital.
C) the marginal product of labor exceeds the wage.
D) the demand curve for labor starts sloping up.

Question 50

If the marginal product of labor is constant in labor, then a market labor demand curve is:

A) positively sloped.
B) negatively sloped.
C) flat.
D) varied.

Question 51

A high demand for labor in one industry will:

A) decrease the number of hours worked in that industry.
B) cause a shortage of workers.
C) attract workers from another industry.
D) cause a surplus of workers.

Question 52

Figure: Market for Plumbers If the market in this figure is in equilibrium, the hourly wage paid to plumbers is ______ and the marginal product of a plumber is ______.

A) $40; $20
B) $30; $50
C) $40; $40
D) $20; $30

Question 53

It is possible for an individual to have a downward-sloping labor supply curve if:

A) the wage increases enough that a worker may decide to work less and enjoy the income.
B) higher wages increase the return to effort, leading to increased hours of work.
C) all other supply curves slope upward.
D) the standard work-week is 40 hours.

Question 54

When labor supply increases, the wage is expected to:

A) increase.
B) decrease.
C) remain the same.
D) change in an indeterminate direction.

Question 55

The individual supply curve for labor:

A) slopes up.
B) slopes down.
C) is flat.
D) starts sloping up and then bends back as wages rise.

Question 56

When labor demand increases, the wage is expected to:

A) increase.
B) decrease.
C) remain the same.
D) change in the same direction.

Question 57

Which of the following best explains why assembly-line workers in the United States earn significantly more than assembly-line workers in Mexico?
I. The supply of low-skilled laborers, such as those that work on assembly lines, is higher in Mexico.
II. The demand for assembly-line workers is higher in the United States.
III. Assembly-line workers are more productive in the United States.

A) I and II only
B) II and III only
C) I and III only
D) I, II, and III

Question 58

If the marginal product of labor is constant in labor, then a firm-level labor demand curve is:

A) positively sloped.
B) negatively sloped.
C) flat
D) varied.

Question 59

An individual's labor supply curve:

A) may be backward bending if the wage is high enough.
B) is always upward sloping.
C) is typically vertical.
D) is identical to the market labor supply curve.

Question 60

An individual labor supply curve:

A) is always positively sloped.
B) is always negatively sloped.
C) is always vertical.
D) can be positively sloped, vertical, or negatively sloped at different ranges.

Question 61

Which of the following is most likely to improve the productivity of workers?

A) federal legislation mandating benefits
B) an increase in unionization
C) an increase in the minimum wage
D) investment in human capital labor market issues

Question 62

Economic theory suggests that college graduates receive higher wages than those with only a high school education because:

A) college graduates tend to unionize.
B) the supply of high school graduates is relatively small compared with the supply of college graduates.
C) college graduates must be paid higher wages to help them pay off their college expenses.
D) college graduates are more productive.

Question 63

If the market wage for electrical engineers in the United States is $50 per hour, then we know that the marginal product of electrical engineers is:

A) exactly $50 an hour.
B) approximately $50 an hour.
C) less than $50 an hour.
D) at least $50 an hour.

Question 64

The wages of office cleaners in the United States are ________ than the wages of office cleaners in India because ________.

A) lower; few Americans want jobs as office cleaners generating a lower supply of office cleaners in the United States
B) lower; Indians work more hours
C) greater; American offices are more productive, hence more valuable to keep clean
D) greater; more Indian cleaners are in a union

Question 65

Workers in many foreign countries such as India are paid much less for work that is very similar to the work done by workers in the United States. One reason for this is that:

A) India is a more productive economy.
B) workers in the United States are greedy.
C) India is a less productive economy.
D) workers in India are less materialistic.

Question 66

Which of the following statements is TRUE?

A) The market supply of labor is always upward sloping, but an individual's labor supply may not be upward sloping throughout its entire range.
B) An individual's supply of labor is always upward sloping, but the market supply of labor may not be upward sloping throughout its entire range.
C) Both the market supply of labor and the individual's labor supply will both be upward sloping.
D) Both the market supply of labor and the individual's labor supply may not be upward sloping across their entire range.

Question 67

A college education in the United States:

A) has been shown to earn a wage premium.
B) is not counted as human capital market issues.
C) does not lead to any difference in wages as compared with a high school education.
D) does not command the same high wages as it did in the past.

Question 68

Wages for low-skilled positions are typically higher in developed countries than wages for identical positions in less-developed countries. Which of the following explains why this is the case?
I. There is a greater supply of low-skilled labor in less-developed countries.
II. There is a greater demand for low-skilled labor in developed countries.
III. There is a greater demand for low-skilled labor in less-developed countries.

A) I only
B) I and II only
C) I and III only
D) II only

Question 69

One reason office cleaners in India earn less than office cleaners in the United States NOT because:

A) American office cleaners work harder than Indian office cleaners.
B) American office cleaners possess higher education levels than Indian office cleaners do.
C) the American economy is more productive than the Indian economy.
D) the Indian economy is more productive than the U.S. economy.

Question 70

The normal shape of the labor market supply curve is:

A) perfectly inelastic.
B) positively sloped.
C) backward bending.
D) unknown.

Question 71

Workers earn higher wages:
I. when the demand for labor rises in an industry.
II. the greater the amount of human capital market issues they possess.
III. the more dangerous the job they perform.

A) II only
B) III only
C) II and III only
D) I, II, and III

Question 72

Compared with a similar job that requires little human capital labor market issues, a job that requires a large amount of human capital labor market issues will likely pay:

A) a lower wage rate.
B) a higher wage rate.
C) the same wage rate.
D) twice the wage rate.

Question 73

The market wage for workers is:
I. equal to the marginal product of labor.
II. determined by the intersection of the firm's demand curve for labor and the individual's supply curve for labor.
III. always greater than the minimum wage.

A) I only
B) I and II only
C) II and III only
D) I, II, and III

Question 74

Which of the following does not represent a human capital labor market issues?

A) skills gained while working on the job
B) a college education
C) a government retraining program
D) all jobs have the same danger level

Question 75

An individual's labor supply curve:

A) is always upward sloping.
B) is always perfectly inelastic.
C) can be either positively or negatively sloped, or perfectly inelastic.
D) is negatively sloped.

Question 76

The market supply of labor is upward sloping because:

A) an individual might work less when his wage increases.
B) higher wages would attract more workers into the industry.
C) an additional worker hired tends to be more productive.
D) higher wages would attract fewer workers into the industry.

Question 77

Why might an individual's labor supply curve bend backwards?

A) As wages rise above a threshold level, the individual will decide to work harder.
B) As wages rise above a threshold level, the individual may opt for more leisure time.
C) As wages rise above a threshold level, firms limit the amount of hours that a worker can work.
D) When wages rise, firms hire fewer workers.

Question 78

The market wage of computer programmers is determined by:

A) the demand for labor.
B) an upward sloping supply curve of labor and a downward sloping demand curve for labor.
C) a downward sloping demand and supply curve of labor.
D) the marginal product of labor and demand curve for labor.

Question 79

If all people had the same preferences and productivity, then the currently highest paying jobs would be the most:

A) easily learned.
B) prestigious.
C) convenient.
D) undesirable.

Question 80

In general, wages are determined:

A) by the skills of the worker, regardless of the country he or she works in.
B) by the skills of the worker and the productivity of the entire economy.
C) based on the average wage for all individuals in a particular country.
D) based on the average marginal product of labor of workers in similar countries.