Deck 17: Monopolistic Competition and Advertising

Question 1

Which of the following statements is 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

Answer 1

D

Question 2

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 or less than the wage.

Answer 2

A

Question 3

Reference: Ref 17-2 (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) 5
B) 6
C) 7
D) 8

Answer 3

C

Question 4

Reference: Ref 17-2 (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 5

Reference: Ref 17-3 (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 6

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.

Question 7

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

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

Question 8

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 9

Reference: Ref 17-2 (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 10

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 11

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.

Question 12

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 13

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

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

Question 14

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 15

Reference: Ref 17-2 (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

Question 16

Reference: Ref 17-3 (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 17

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 18

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 19

Reference: Ref 17-1 (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 20

Reference: Ref 17-1 (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 21

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) None of the answers is correct.

Question 22

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 23

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 24

Wages for low-skilled positions are typically higher in developed countries than wages for identical positions in less- developed countries. Which of the following explain 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 25

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 26

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 27

Office cleaners in India earn less than office cleaners in the United States 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) All of the answers are correct.

Question 28

Workers earn higher wages: I. when the demand for labor rises in an industry. II. the greater the amount of human capital 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 29

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 30

The normal shape of the labor market supply curve is:

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

Question 31

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 32

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

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

Question 33

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.

Question 34

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) more than $50 an hour.
B) around $50 an hour.
C) less than $50 an hour.
D) at least $50 an hour.

Question 35

Which of the following represents human capital?

A) skills gained while working on the job
B) a college education
C) a government retraining program
D) All of the answers are correct.

Question 36

Reference: Ref 17-3 (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 37

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 38

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 to 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 39

Compared to a similar job that requires little human capital, a job that requires a large amount of human capital will likely pay:

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

Question 40

A college education in the United States:

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

Question 41

A firefighter is likely to earn ________ than a receptionist because ________.

A) more; the job is more fun.
B) more; the job is more prestigious.
C) more; the job is more dangerous.
D) less; the job has unattractive characteristics.

Question 42

Which of the following is NOT a possible cause of the increasing return to college education since the 1980s?

A) The ability to work with computers has made an education more valuable than in times past.
B) The flow of new people into the ranks of the college- educated has been limited.
C) The cost of college education has been skyrocketing.
D) None of the answers is correct.

Question 43

Working conditions, prestige, location, freedom, variety, and employee safety are all examples of:

A) sources of wage differentials.
B) tools of employment discrimination.
C) trivial job characteristics.
D) sociological features of labor markets.

Question 44

Truck drivers who drive on the ice roads in Alaska and Canada (like those on Ice Road Truckers) earn:

A) the same hourly wages as most other professions.
B) a college wage premium.
C) a compensating wage differential.
D) All of the answers are correct.

Question 45

Compensating differentials give firms an incentive to increase safety only if:

A) firms perceive enough potential profit to pay for workers' safety.
B) workers know that the job is risky.
C) the premium of workers' compensation insurance is low.
D) All of the answers are correct.

Question 46

Why do similar jobs have similar compensation packages? I. The law of demand and supply will ensure that the salaries will be similar over time. II. Wages and ―fun‖ adjust between jobs until compensation packages are similar. III. Because exactly the same skills are being applied.

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

Question 47

Suppose that being an accountant and a musician require similar amounts of skills, education, training, and so forth. If accountants are paid higher wages than musicians:

A) the supply of musicians would increase and the supply of accountants would decrease.
B) the supply of musicians would decrease and the supply of accountants would increase.
C) the supply of both musicians and accountants would increase.
D) the supply of both musicians and accountants would decrease.

Question 48

Which of the following is NOT the main driver behind the process of improving the quality of American jobs?

A) government regulation
B) labor unionization
C) increasing wealth
D) profit incentive

Question 49

Why are private security guards in Iraq paid more than private security guards in the United States?

A) The security guards in Iraq receive a compensating differential to offset the increased risk of death.
B) Being a security guard in Iraq is more glamorous than in the United States.
C) Being a security guard in Iraq is likely to lead to better jobs in the future.
D) All of the answers are correct.

Question 50

Human capital:

A) refers to workers who do highly repetitive work, which requires little thought and creativity.
B) is the equipment, tools, and computers that make workers more productive.
C) is the skills, knowledge, and experience that people obtain.
D) refers to a worker in a capital intensive industry.

Question 51

A compensating differential is mainly a cause of a difference in:

A) wages due to differences in working conditions.
B) wages due to differences in human capital.
C) wages due to differences in productivity.
D) All of the answers are correct.

Question 52

Why are jobs safer today than they were some decades ago?

A) because workers are wealthier and less willing to take on risk
B) because of the laws enforced by OSHA (Occupational Safety and Health Administration)
C) Market competition has ensured that firms have installed safety procedures.
D) All of the answers are correct.

Question 53

Fishermen who go deep sea crab fishing (like those on The Deadliest Catch) earn:

A) the same hourly wages as most other professions.
B) a compensating wage differential.
C) a college wage premium.
D) All of the answers are correct.

Question 54

Which of the following statements is FALSE?

A) The returns to college education have been increasing over time.
B) College graduates earn about twice that of high school graduates.
C) There is almost no return to getting more education beyond a bachelor's degree.
D) Grade school deficiencies may limit the number of people entering college, increasing the returns to education.

Question 55

One of the most important reasons why job safety increases over time is:

A) government regulation.
B) changing labor market condition.
C) economic growth.
D) labor unionization.

Question 56

Which of the following best describes the major factor in making jobs safer?

A) Labor unions are aggressive in pursuing safety objectives.
B) Increased wealth created by economic growth makes workers less willing to take on excessive risk.
C) OSHA oversees workplace safety and levies fines.
D) All of the answers are correct.

Question 57

Some workers have higher wages than others because:

A) they have more human capital.
B) they have more access to physical capital.
C) they work harder than others.
D) All of the answers are correct.

Question 58

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

Question 59

Which of the following statements is TRUE?

A) Because employers care so much about maximizing profits, they are likely to discriminate against minority workers.
B) All else equal, there is no trade-off between risk of job injury and wages.
C) The falling returns to human capital investment for women are due to employer discrimination.
D) The rising returns to human capital may be attributable to the growing importance of advanced technology.

Question 60

Suppose that the market for window cleaners is in equilibrium at a wage of $16. If window cleaning becomes safer:

A) the demand for window cleaners will increase causing the equilibrium wage to rise above $16.
B) the demand for window cleaners will decrease causing the equilibrium wage to fall below $16.
C) the supply of window cleaners will increase causing the equilibrium wage to fall below $16.
D) the supply of window cleaners will decrease causing the equilibrium wage to fall below $16.

Question 61

How might unions benefit workers?

A) by limiting the number of people who can be hired by firms
B) by striking and stalling production
C) by demanding improved labor/management relations and improving worker safety and work conditions
D) All of the answers are correct.

Question 62

The two major types of discrimination are:

A) statistical discrimination and preference-based discrimination.
B) racial discrimination and gender discrimination.
C) age discrimination and disability discrimination.
D) employment discrimination and compensation discrimination.

Question 63

Which of the following is TRUE?

A) The main reason why wages are high in some countries is the existence of unions in those countries.
B) The wages in unionized jobs tend to be lower than the wages in nonunionized jobs.
C) Unions increase the supply of labor and increase wages as a result.
D) Unions raise wages for some workers and lower wages for other workers.

Question 64

Which of the following is NOT the primary method that unions use to raise wages?

A) restricting their membership
B) threatening to strike unless employers hire union labor
C) reducing the supply of labor to an industry
D) lobbying the government to increase the minimum wage

Question 65

(Figure: Unionized Jobs) Refer to the figure. Which of the following would represent the wage and number of workers of unionized jobs?

A) W1; N1
B) W1; N2
C) W2; N1
D) W2; N2

Question 66

Statistical discrimination is:

A) statistical data of discrimination.
B) applying statistical analysis in discrimination.
C) collecting information to justify hiring individuals.
D) using information about group averages to make conclusions about individuals.

Question 67

If a union forms in a market that is currently in equilibrium:

A) wages, employment, and working conditions will improve.
B) wages, employment, and working conditions will decline.
C) wages will increase and employment will remain the same.
D) the number of workers employed may decrease.

Question 68

Which of the following provides the clearest evidence of employment discrimination by firms against minority employees?

A) Hours worked by minority employees are greater than hours worked by whites.
B) The mean years of schooling of minorities is less than that of whites.
C) The average wage of minority workers is less than the average wage of whites with similar productive characteristics.
D) The average wage of minority workers is less than the average wage of whites.

Question 69

Which of the following statements is TRUE? I. Statistical discrimination is based on ill will toward a group because of their race, sex, nationality, or religion. II. Statistical discrimination is judging people by the averages of the groups to which they belong. III. As better ways of judging people develop, the merit of using statistical discrimination rises.

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

Question 70

In a world of perfect information:

A) statistical discrimination would not exist.
B) employers, but not employees, would practice statistical discrimination.
C) employees, but not employers, would practice statistical discrimination.
D) statistical discrimination would be even more important.

Question 71

What negative impacts can unions have on industries and the economy?

A) They can initiate worker strikes and sit-ins which stall production.
B) By limiting the supply of labor in one industry they can cause an increased supply of labor in other industries, which causes lower wages in those industries.
C) They can limit firms to hiring only unionized workers, which could stop firms from hiring the labor with the most appropriate skills.
D) All of the answers are correct.

Question 72

Which of the following is NOT a kind of preference-based discrimination?

A) discrimination using statistics
B) discrimination by employers
C) discrimination by customers
D) discrimination by employees

Question 73

Which of the following statements is NOT correct?

A) Unions can raise the wages of particular classes of workers.
B) Unions are the fundamental reason why wages are high in the wealthy countries.
C) High wages of physicians are due to the restriction of physician supply.
D) Less unionized Britain has grown more rapidly than the more unionized France.

Question 74

Unions may ________ the wages of their members but they might ________ the wages of everyone else.

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

Question 75

Which of the following best describes the influence of labor unions on workers?

A) The harm of labor unions to workers is both immediately evident and longer term.
B) The benefit of labor unions to workers is both immediately evident and longer term.
C) The benefit of labor unions to workers is immediately evident while the harm is longer term and harder to see.
D) Labor unions provide neither benefit nor harm to workers.

Question 76

When employment discrimination stems from personal prejudices of employers, economic theory suggests that:

A) discriminating employers will be more profitable.
B) the wages of employees who are discriminated against will rise.
C) it will be costless for employers to discriminate.
D) the employers who discriminate will face higher costs.

Question 77

If a firm refuses to hire minorities due to prejudice, its profits:

A) tend to increase.
B) tend not to be affected.
C) tend to decrease.
D) will increase slightly.

Question 78

Which of the following is the most important source of differences in the wages paid to workers?

A) whether workers are unionized or not
B) the size of the labor force
C) productivity per hour
D) discrimination against certain workers

Question 79

Which of the following is the least likely explanation for an increase in wages needed to attract a given number of workers?

A) The job is stressful.
B) The job is dangerous.
C) The employer discriminates.
D) The job is not very prestigious.

Question 80

Which of the following statements is TRUE? I. Union members earn higher wages because unions restrict the supply of labor. II. Unions are similar to cartels in that they restrict competition among workers. III. Countries with more union members earn more than countries with fewer union members.

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