Question 1

Efficiency wage theory suggests it may be efficient to pay more than the market wage

Accepted Answer

Efficiency wage theory posits that paying workers higher wages than the market rate can lead to increased productivity and efficiency, making it beneficial for employers in the long run.

Question 2

The demand for labour depends on the demand for the final product; it is known as a _______ demand.

Accepted Answer

Derived

Question 3

An increase in labour productivity increases the demand for labour.

Accepted Answer

True

Question 4

The reservation wage is the maximum amount an employee would need to accept a job

Accepted Answer

The reservation wage is the minimum wage a worker is willing to accept to take a job, not the maximum.

Question 5

How may an increase in the demand for labour occur?&#10;A) When there is less productivity&#10;B) With a decrease in demand for the final product.&#10;C) With an increase in the revenue from selling the extra units.&#10;D) With an increase in the supply of labour.

Accepted Answer

An increase in the demand for labour can occur when there is an increase in the revenue from selling the extra units produced. This suggests that the firm is experiencing higher demand for its products, making it profitable to hire more workers to increase production.

Question 6

On what does the supply of labour depend?&#10;A) The demand for labour.&#10;B) Benefit rates.&#10;C) The marginal revenue product.&#10;D) The marginal efficiency of capital.

Accepted Answer

The supply of labour is influenced by benefit rates, as higher benefits can reduce the incentive for individuals to work, thus affecting the supply of labour.

Question 7

Which is most likely to lead to an increase in the wage rate?&#10;A) An increase in the demand for labour.&#10;B) An increase in the supply for labour.&#10;C) A decrease in the demand for labour.&#10;D) A decrease in the demand for the product

Accepted Answer

An increase in the demand for labour typically leads to an increase in the wage rate because employers are willing to pay more to attract or retain workers.

Question 8

Which is most likely to lead to a decrease in the wage rate?&#10;A) An increase in the demand for labour.&#10;B) An increase in the supply for labour.&#10;C) A decrease in the supply of labour.&#10;D) An increase in the demand for the product

Accepted Answer

An increase in the supply of labour, without a corresponding increase in demand, typically leads to a decrease in the wage rate because there are more workers available than jobs, leading to competition among workers and a willingness to accept lower wages.

Question 9

A minimum wage set below equilibrium will lead to excess supply of labour

Accepted Answer

A minimum wage set below the equilibrium wage would not lead to excess supply of labor; it would have no direct effect on the labor market because employers would continue to pay the equilibrium wage or higher to attract employees.

Deck 6: Labour Market