Deck 8: Labor Markets and Earnings

Question 1

Refer to the accompanying table to answer the questions that follow.

If the price of output falls from $5 to $2,the value of the marginal product of labor of all workers:

A) increases.
B) remains unchanged.
C) increases at an increasing rate.
D) decreases at an increasing rate.
E) decreases.

Answer 1

decreases.

Question 2

Which of the following is an example of a firm's derived demand?

A) The demand for a firm's product is a function of the population demographics.
B) Working more hours per week will increase the income derived from one's job.
C) Factors that increase the demand for labor will increase the equilibrium wage.
D) The wage that a worker earns is a function of his or her human capital.
E) A firm's demand for college textbook study guide authors is linked to the supply of college textbooks.

Answer 2

A firm's demand for college textbook study guide authors is linked to the supply of college textbooks.

Question 3

Diminishing marginal product occurs when:

A) the marginal product of an input decreases as the quantity of the input increases.
B) total output decreases as the quantity of an input increases.
C) the marginal product of an input decreases as the quantity of the input decreases.
D) total output increases as the quantity of an input increases.
E) the marginal product of an input increases as the quantity of the input increases.

Answer 3

the marginal product of an input decreases as the quantity of the input increases.

Question 4

Refer to the accompanying table to answer the questions that follow.

The marginal product of labor of the fourth worker is:

A) 10.
B) 20.
C) 4.
D) 38.
E) 42.

Question 5

Refer to the accompanying table to answer the questions that follow.

If the price of output is $5,the value of the marginal product of labor of the third worker is:

A) $8.
B) $30.
C) $40.
D) $38.
E) $190.

Question 6

Which of the following is NOT a factor of production?

A) land
B) output
C) inputs
D) entrepreneurship
E) capital

Question 7

Refer to the accompanying table to answer the questions that follow.

If the price of output is $2 and the wage for workers is $4,how many workers will the firm hire?

A) 1
B) 2
C) 3
D) 4
E) 5

Question 8

Which of the following situations does NOT represent derived demand?

A) the demand for bakers
B) the demand for home ovens
C) the demand for fast-food fryers
D) the demand for office space
E) the demand for trainers

Question 9

The fact that workers must share a limited amount of space and equipment results in __________ marginal productivity.

A) increasing
B) constant
C) fluctuating
D) unpredictable
E) decreasing

Question 10

Derived demand is:

A) consumer demand for goods and services.
B) based on the prices of factors of production.
C) the demand for factors of production directly by business.
D) the demand for factors of production dependent on consumer demand for output.
E) calculated for firms.

Question 11

Factor markets for baked goods are NOT influenced by the:

A) marginal productivities of labor.
B) marginal productivities of land.
C) demand for baked goods.
D) market prices for final goods and services.
E) number of manufacturers of baking ovens.

Question 12

Because a firm's demand for a factor of production is derived from its decision to supply a good in the market,it is called a:

A) production demand.
B) derived demand.
C) demand-supply transfer.
D) secondary demand.
E) differentiated demand.

Question 13

Derived demand best describes the demand for which of the following options?

A) cupcakes
B) water bottles
C) hair stylists
D) cat food
E) cars

Question 14

Which of the following is an example of a firm's derived demand?

A) The demand for a firm's product is a function of the geographical factors.
B) Working more hours per week will increase the income derived from one's job.
C) Workers with higher levels of experience earn more, on average, than workers with lower levels of experience.
D) The wage that a worker earns is a function of his or her human capital.
E) A tractor manufacturer's demand for assembly line workers is inseparably linked to the supply of tractors.

Question 15

The diminishing marginal product of labor exists when the last worker hired produces:

A) more output than the previous worker.
B) more value than the previous worker.
C) less value than the previous worker.
D) the same amount of output as the previous worker.
E) less output than the previous worker.

Question 16

Markets for factors of production are different from product markets in an important way because:

A) the demand for a factor of production is likely to be upward-sloping, in violation of the law of demand.
B) equilibrium is the exception, and not the rule, in factor markets.
C) the demand for a factor of production is a derived demand.
D) the supply-demand characteristics of product markets are not applicable to factor markets.
E) product markets derive their demand from factor markets.

Question 17

The basic tools of supply and demand apply to:

A) both markets for goods and services and markets for labor services.
B) markets for goods and services but not to markets for labor services.
C) markets for goods and services but not to markets for factors of production.
D) all markets except those in which demand is derived demand.
E) only markets where demand is derived.

Question 18

Factors of production are:

A) goods and services.
B) used to make goods and services.
C) purchased by the consumer for personal use.
D) sold by the consumer for income.
E) the property of firms.

Question 19

Refer to the accompanying table to answer the questions that follow.

The marginal product of the first worker is:

A) 4.
B) 6.
C) 10.
D) 20.
E) 2.

Question 20

Which of the following describes the marginal product of labor?

A) It is the additional amount of consumer goods that can be bought from an additional hour's worth of work.
B) It is the additional amount of inputs a firm demands based on a change in consumer demand for the output.
C) It is the additional amount of output that can be produced from hiring one more worker.
D) It is the decreasing amount of output that can be produced from hiring one more worker.
E) It is the value of production from the last worker hired.

Question 21

Refer to the accompanying graphs to answer the questions that follow.


Choose the graph that represents the following situation: Consumer demand for Patty's Pickles increases as customers find out that pickles are highly nutritious.

A) Graph A
B) Graph B
C) Graph C
D) Graph D
E) Graph E

Question 22

Use the accompanying graph, which depicts Mighty Max's labor demand for his duffle-bag business, to answer the questions that follow.

The labor demand curve shown is calculated based on a duffel-bag price of $10.If the price increases to $20 per bag,what happens to the labor demand curve?

A) It shifts to the left.
B) It shifts to the right.
C) It remains unchanged.
D) The firm moves upward along the labor demand curve.
E) The firm moves downward along the labor demand curve.

Question 23

Use the accompanying graph, which depicts Mighty Max's labor demand for his duffle-bag business, to answer the questions that follow.

Assume that the price per duffle bag rises from $10 to $20.What is the value of the marginal product of labor of the twentieth worker?

A) $30
B) $40
C) $50
D) $60
E) $70

Question 24

Bobby knows that she is producing a value just equal to her wage.If the price of what she makes falls,Bobby knows that she:

A) will be able to keep her job.
B) is likely to work overtime.
C) will work less.
D) is likely to be fired.
E) will not be able to find work anywhere.

Question 25

Use the following information to answer the questions that follow.
Nicky L, owner of NLD Incorporated, knows that the marginal product of labor (MPL) for his workers can be defined as follows:
MPL = 32 - L
The total output a given level of workers can produce is found as:
Q = 32L - L²
He also knows that the price of his output is $3. His profits can be found as:
Profit = P × Q - W × L
What additional amount of output does the thirtieth worker contribute?

A) 150 units
B) 60 units
C) 2 units
D) 14 units
E) 9 units

Question 26

If the price of pencils falls,the marginal product of labor will __________ and the value of the marginal product of labor will __________.

A) fall; fall
B) remain unchanged; increase
C) rise; rise
D) remain unchanged; decrease
E) remain unchanged; remain unchanged

Question 27

Use the accompanying table, which depicts the worker productivity of King Kupcake, to answer the questions that follow.

Cupcakes previously sold for $3 and now sell for $5.The number of workers that King Kupcakes hires will __________.

A) fall
B) remain unchanged, but employees will have to work overtime
C) increase
D) stay the same
E) increase indefinitely

Question 28

Use the accompanying graph, which depicts Mighty Max's labor demand for his duffle-bag business, to answer the questions that follow.

If the wage of the fifth worker is $20 and her value of the marginal product of labor is $5,the firm:

A) benefits by stopping at this level of labor.
B) is likely to fire the fifth worker.
C) asks this fifth worker to work overtime.
D) benefits by hiring more workers.
E) is likely to lose profit by hiring more workers.

Question 29

Use the accompanying graph, which depicts Mighty Max's labor demand for his duffle-bag business, to answer the questions that follow.

If 80 workers are hired,you know that the wage rate must be:

A) $25.
B) $20.
C) $15.
D) $10.
E) $5.

Question 30

Amy just applied for a position with Rory's firm.Rory knows that Amy will earn $20 an hour and can produce a value of the marginal product of labor (VMPL)of $40.Rory will __________ Amy because her VMPL is __________.

A) hire; positive
B) not hire; positive
C) hire; negative
D) not hire; negative
E) maybe hire; positive

Question 31

If workers become more productive in a given occupation,they will likely see their employment __________.

A) fall
B) double
C) rise
D) stay the same
E) go into overtime

Question 32

Use the following information to answer the questions that follow.
Nicky L, owner of NLD Incorporated, knows that the marginal product of labor (MPL) for his workers can be defined as follows:
MPL = 32 - L
The total output a given level of workers can produce is found as:
Q = 32L - L²
He also knows that the price of his output is $3. His profits can be found as:
Profit = P × Q - W × L
What is the value of additional output produced by the twelfth worker?

A) $20
B) $100
C) $10
D) $60
E) $80

Question 33

Use the accompanying table, which depicts the worker productivity of King Kupcake, to answer the questions that follow.

When King Kupcake hires its 300th worker,what is that worker's marginal product of labor?

A) 300 cupcakes
B) 200 cupcakes
C) 100 cupcakes
D) 2 cupcakes
E) 3 cupcakes

Question 34

Use the accompanying graph, which depicts Mighty Max's labor demand for his duffle-bag business, to answer the questions that follow.

If the wage is $20,Mighty Max will hire __________ workers.

A) 20
B) 30
C) 40
D) 50
E) 60

Question 35

As computer usage in companies and in the home has increased,the labor demand for IT workers has:

A) remained steady.
B) decreased.
C) fallen to zero.
D) infinitely increased.
E) increased.

Question 36

Use the following information to answer the questions that follow.
Nicky L, owner of NLD Incorporated, knows that the marginal product of labor (MPL) for his workers can be defined as follows:
MPL = 32 - L
The total output a given level of workers can produce is found as:
Q = 32L - L²
He also knows that the price of his output is $3. His profits can be found as:
Profit = P × Q - W × L
What wage would be required to allow Nicky L to hire the twenty-fifth worker?

A) $3
B) $7
C) $21
D) $125
E) $25

Question 37

Use the accompanying graph, which depicts Mighty Max's labor demand for his duffle-bag business, to answer the questions that follow.

Assume that the price of duffle bags is $10.If the marginal product of labor of the sixtieth worker drops by half,what is the value of the marginal product of labor of the sixtieth worker now?

A) $10
B) $15
C) $20
D) $25
E) $30

Question 38

The use of farm machinery to plant and harvest crops has increased because it is more productive than the typical farmhand.Demand for farmhands has:

A) remained steady.
B) shifted to other areas of the farm.
C) decreased.
D) fallen to zero.
E) increased.

Question 39

Use the accompanying table, which depicts the worker productivity of King Kupcake, to answer the questions that follow.

If the wage is $8 and the price of a cupcake is $4,find King Kupcake's profits at the optimal amount of labor.

A) $2,200
B) $2,600
C) $4,600
D) $5,000
E) $7,500

Question 40

Donna owns a temp agency.She sees demand for her workers increase because firms prefer a more contingent workforce.The value of the marginal product of labor of her temps:

A) stays the same.
B) increases because the temps produce more per hour.
C) decreases because the temps know they are going to get jobs.
D) increases because the price of their services is higher.
E) falls because job uncertainty lowers productivity.

Question 41

If more of the production process for automobiles were switched over to machines,the demand for auto-factory assembly line workers would __________ for machine maintenance.

A) decline but increase
B) decline and also decline
C) increase but decline
D) increase and also increase
E) remained unchanged but increase

Question 42

Refer to the accompanying graphs to answer the questions that follow.


Which graph shows a person who has a fixed quantity of hours that he or she is willing to work per week?

A) Graph A
B) Graph B
C) Graph C
D) Graph D
E) Graph E

Question 43

The labor supply curve is fundamentally a representation of the trade-off people face between which of the following?

A) leisure and derived demand
B) work and wages
C) work and leisure
D) wages and productivity
E) technology and wages

Question 44

The fundamental decision faced by workers is called:

A) labor demand.
B) labor supply.
C) income effect.
D) the labor-leisure trade-off.
E) the substitution effect.

Question 45

Use the accompanying table, which shows the supply and demand schedules for workers in the country of Hovian, to answer the questions that follow.

Wages above __________ will cause a __________.

A) $10; surplus
B) $50; shortage
C) $20; surplus
D) $30; shortage
E) $40; shortage

Question 46

Use the accompanying table, which shows the supply and demand schedules for workers in the country of Hovian, to answer the questions that follow.

The equilibrium wage is:

A) $10.
B) $20.
C) $30.
D) $40.
E) $50.

Question 47

Flor's hourly wage increases from $8 to $10.Which of the following describes a consequence of the increase in Flor's wage?

A) The opportunity cost of Flor's leisure time has decreased.
B) If Flor's labor supply curve is upward-sloping, she will choose to work fewer hours.
C) Flor will not want a higher wage to maintain her more affluent status.
D) Flor may choose to work fewer hours due to the increase in her wage.
E) If Flor's labor supply curve is downward-sloping, she will choose to work more hours.

Question 48

When Jane earns more income but still works less,leisure is a __________ good for Jane.

A) substitute
B) complement
C) luxury
D) necessity
E) normal

Question 49

Use the accompanying table, which shows the supply and demand schedules for workers in the country of Hovian, to answer the questions that follow.

The supply schedule indicates that the labor supply curve is:

A) constant.
B) upward-sloping.
C) downward-sloping.
D) vertical.
E) horizontal.

Question 50

Wendy's hourly wage decreases from $15 to $12.Which of the following does NOT describe a consequence of the decrease in Wendy's wage?

A) Wendy may choose to work fewer hours due to the decrease in her wage.
B) The opportunity cost of Wendy's leisure time has decreased.
C) Wendy will now see an increase in her opportunity cost of not working.
D) Wendy may choose to work more hours due to the decrease in her wage.
E) Wendy will now have less incentive to leave this employment for other opportunities.

Question 51

Refer to the accompanying graphs to answer the questions that follow.


Choose the graph that represents the following situation: A documentary on bottled water demonstrates the high impact this product has on the environment.In response,consumers drastically reduce their consumption of this product.

A) Graph A
B) Graph B
C) Graph C
D) Graph D
E) Graph E

Question 52

For a worker,the opportunity cost of an hour of leisure:

A) is determined by factors that are unrelated to his or her hourly wage.
B) is the same for a corporate chief executive officer as it is for a restaurant waiter.
C) falls by $10 when his or her wage rises by $10 per hour.
D) rises by $10 when his or her wage rises by $10 per hour.
E) depends on the tastes and preferences of the worker.

Question 53

Refer to the accompanying graphs to answer the questions that follow.


Choose the graph that represents the following situation: Out of fear of losing their jobs in a depressed economic climate,workers increase their rate of production.

A) Graph A
B) Graph B
C) Graph C
D) Graph D
E) Graph E

Question 54

No matter how high his wage rises,Johann will always work more.His labor supply curve is:

A) downward-sloping.
B) horizontal.
C) vertical.
D) upward-sloping.
E) downward-sloping at a decreasing rate.

Question 55

When people make more money,they sometimes take more vacation time.Based on this information,we can say that leisure is a(n)________ good.

A) substitute
B) complement
C) inferior
D) trade
E) normal

Question 56

Labor supply is the relationship between:

A) wages and willingness to hire workers.
B) price of output and amount of output for sale.
C) price of capital and amount of capital for sale.
D) wages and willingness to work.
E) wages and amount of output for sale.

Question 57

Refer to the accompanying graphs to answer the questions that follow.


Choose the graph that reflects this scenario: Sallie decides that she values income much more strongly because she uses the money to buy goods she can enjoy more than free time.

A) Graph A
B) Graph B
C) Graph C
D) Graph D
E) Graph E

Question 58

Beth is deciding whether to pick up more hours at work or to take a vacation.This decision best describes:

A) her hours decision.
B) her labor-force participation decision.
C) the value she places on income.
D) the labor-leisure trade-off.
E) the necessity of income.

Question 59

When the opportunity cost of leisure is high,people tend to work __________ hours.When it is low,people tend to work __________ hours.

A) the same; fewer
B) more; fewer
C) fewer; more
D) more; the same
E) fewer; the same

Question 60

When their wages rise,Bob works more and Lisa works less.We can infer that Bob values income __________ than Lisa.

A) less
B) the same
C) more
D) half as much
E) a third more

Question 61

When a labor market experiences a surplus of labor,there is downward pressure on:

A) the demand for labor.
B) the supply of labor.
C) wages.
D) derived supply.

Question 62

Use the accompanying table, which shows the supply and demand schedules for workers in the country of Hovian, to answer the questions that follow.

If the wage is set temporarily at $15,it will need to __________ in order to restore equilibrium.

A) decrease to zero
B) increase to $35
C) fall
D) increase
E) remain unchanged

Question 63

The government lowers the retirement age to 55.We would expect to see the labor supply curve:

A) stay the same.
B) shift left.
C) stay the same but move upward.
D) stay the same but move downward.
E) shift right.

Question 64

The accompanying graph represents Zendar's labor market. Use this graph to answer the questions that follow.

At a wage of __________,there is a __________ of __________ workers.

A) $10; surplus; 30
B) $40; shortage; 30
C) $10; shortage; 30
D) $35; shortage; 20
E) $25; surplus; 10

Question 65

The citizens of Kingsville notice that their friends and family in the neighboring city of Deville are earning higher wages.We would expect the labor supply in Kingsville to __________ and the labor supply in Deville to shift __________.

A) shift right; right
B) shift left; left
C) remain unchanged; right
D) shift left; right
E) shift right; left

Question 66

After World War II,social norms relating to women's participation in the labor force relaxed and women were more likely to be employed outside the home.We would expect to see the labor supply curve:

A) stay the same.
B) shift left.
C) stay the same but move upward.
D) stay the same but move downward.
E) shift right.

Question 67

In 1997,Serbia experienced a civil war.The civil unrest sent thousands of refugees across the Adriatic Sea to Italy,where they sought relief from the fighting.The Serbian civil war probably affected Italian labor markets by causing:

A) Italian workers to migrate toward the coast closest to Serbia.
B) total employment in Italy to decrease.
C) wages in Italy to increase.
D) the marginal product of labor in Italy to decrease.
E) higher wages in Rome, Italy, across the country from the coast closest to Serbia.

Question 68

The accompanying graph represents Zendar's labor market. Use this graph to answer the questions that follow.

What is the equilibrium number of workers in Zendar?

A) 20
B) 25
C) 30
D) 35
E) 40

Question 69

Suppose that workers from northern Minnesota,North Dakota,and Montana decide to emigrate to southern Canada.In the labor market in the northern United States,the equilibrium wage:

A) and the equilibrium quantity of labor will fall.
B) will rise, and the equilibrium quantity of labor will fall.
C) will not change, since the northern United States's labor market is small.
D) will fall, and the equilibrium quantity of labor will rise.
E) and the equilibrium quantity of labor will rise.

Question 70

Use the accompanying table, which shows the supply and demand schedules for workers in the country of Hovian, to answer the questions that follow.

There will be a surplus of __________ workers at a wage of __________.

A) 75; $10
B) 100; $20
C) 135; $40
D) 40; $40
E) 50; $30

Question 71

Migration is when:

A) foreign persons enter a country.
B) foreign persons leave a country.
C) citizens move to another country.
D) citizens move within their own country.
E) foreign persons move within their own country.

Question 72

Immigration is when:

A) foreign persons enter another country.
B) foreign persons leave another country.
C) citizens move to another country.
D) citizens move within their own country.
E) foreign persons move within their own country.

Question 73

The minimum wage is increased to $15.This higher wage might __________ labor-force participation,shifting the labor supply curve to the __________.

A) decrease; right
B) increase; left
C) decrease; left
D) increase; right
E) not change; right

Question 74

More job opportunities open up in the South,prompting labor supply curves in northern states to __________ and in southern states to __________.

A) remain unchanged; shift right
B) shift right; shift right
C) shift left; shift right
D) shift left; remain unchanged
E) shift left; shift left

Question 75

Use the accompanying table, which shows the supply and demand schedules for workers in the country of Hovian, to answer the questions that follow.

If the wage is temporarily set at $25,it will need to __________ in order to restore equilibrium.

A) rise
B) fall
C) remain unchanged
D) decrease to zero
E) increase to $30

Question 76

In 1997,Serbia experienced a civil war.The civil unrest sent thousands of refugees across the Adriatic Sea to Italy where they sought relief from the fighting.The Italian government started to patrol the Adriatic Sea and had a policy of returning all refugees to Serbia.This policy would contribute to

A) a decrease in the demand for labor in Italy.
B) an increase in the supply of labor in Italy.
C) an increase in the demand for labor in Italy.
D) a decrease in the supply of labor in Italy.
E) preventing an increase in the supply of labor in Italy.

Question 77

The labor market is said to be in equilibrium when:

A) everyone who wants to work is supplying his or her labor.
B) the number of workers is equal to the number of jobs available at a specific wage.
C) firms are unwilling to hire more workers.
D) workers keep their hours constant.
E) the number of available workers is increasing.

Question 78

The accompanying graph represents Zendar's labor market. Use this graph to answer the questions that follow.

To have no surplus or shortage of workers in Zendar,what does the wage rate have to be?

A) $5
B) $10
C) $15
D) $20
E) $25

Question 79

The distribution of illegal immigrant workers in the United States is:

A) concentrated in low-skilled jobs.
B) concentrated in high-skilled jobs.
C) evenly distributed among low-skilled, medium-skilled, and high-skilled jobs.
D) more concentrated in low-skilled and high-skilled jobs than in medium-skilled jobs.
E) more concentrated in low-skilled and medium-skilled jobs than in high-skilled jobs.

Question 80

Suppose that workers from northern Minnesota,North Dakota,and Montana decide to emigrate to southern Canada.In the labor market in southern Canada,the equilibrium wage:

A) and the equilibrium quantity of labor will fall.
B) will rise, and the equilibrium quantity of labor will fall.
C) will not change, since Canada's labor market is large.
D) will fall, and the equilibrium quantity of labor will rise.
E) and the equilibrium quantity of labor will rise.