Deck 11: Labor Demand and Supply

Question 1

The wage in a labor market is determined by the

A)intersection of its labor demand and labor supply curves.
B)difference in the demand for jobs and the supply of jobs.
C)positive slope of the demand curve and the negative slope of the supply curve.
D)length of the labor demand curve and the labor supply curve.

Answer 1

A

Question 2

In the labor market for computer programmers, the labor demand represents

A)the workers looking for a job as a programmer.
B)the employers looking to hire programmers.
C)all the workers looking for a job.
D)all the employers looking to hire.

Answer 2

B

Question 3

In the labor market for computer programmers, the labor supply represents

A)all the workers seeking to sell their labor.
B)all the firms seeking to hire labor.
C)the workers seeking to sell their labor as programmers.
D)the firms seeking to hire programmers.

Answer 3

C

Question 4

The labor demand curve in a labor market

A)is based on the workers demanding jobs in the market.
B)is based on the firms selling jobs in the market.
C)slopes upward.
D)slopes downward.

Question 5

The labor supply curve in a labor market

A)is based on the firms demanding labor in the market.
B)is based on the firms selling jobs in the market.
C)slopes upward.
D)slopes downward.

Question 6

In a labor market, the wage is

A)the price of labor.
B)the quantity of labor.
C)what workers pay.
D)what employers receive.

Question 7

In a labor market, the quantity is

A)the wage or amount of money paid.
B)the hours of work bought or sold.
C)the different types of skills that are sought.
D)the number of companies hiring.

Question 8

In a labor market graph, _____ is measured on the vertical axis, and _____ is measured on the horizontal axis.

A)product price; number of workers
B)number of workers; product price
C)wage; hours of labor
D)hours of labor; wage

Question 9

As wage rises, the opportunity cost principle leads to a _____ in the number of hours supplied and a _____ in the number of hours demanded in the labor market for marketers.

A)fall; rise
B)fall; fall
C)rise; rise
D)rise; fall

Question 10

According to the cost-benefit principle, the number of labor hours demanded will _____, and the number of labor hours supplied will _____ as the wage decreases.

A)rise; fall
B)fall; fall
C)rise; rise
D)fall; rise

Question 11

In a perfectly competitive labor market, employers

A)pay varying wages.
B)pay the market wage.
C)who pay less than the market wage will attract workers.
D)have an incentive to pay more than other employers.

Question 12

In a perfectly competitive labor market, employers will not pay less than the market wage because at a wage below the equilibrium

A)there would be a surplus of workers.
B)they would be inundated with excess workers.
C)they would not be able to hire anyone.
D)the equilibrium wage would rise.

Question 13

In a perfectly competitive labor market, employers will not pay more than the market wage because:

A)there would be a shortage of workers at a wage above equilibrium.
B)good workers would go to other firms.
C)other firms would also pay the higher wage.
D)plenty of good workers are available at the market wage.

Question 14

In a perfectly competitive labor market, the manager's hiring decision is about

A)how many workers to hire.
B)what wage to pay.
C)both how many workers and what wage to pay.
D)how to avoid a labor shortage.

Question 15

Which of the following is NOT a principle used in determining how many workers a company should hire?

A)The opportunity cost principle
B)The absolute advantage principle
C)The marginal principle
D)The cost-benefit principle

Question 16

The marginal product of labor is the

A)amount of extra worker time it takes to produce one extra unit of output.
B)change in output from the slowest worker to the most productive worker.
C)extra output produced by all the firm's employees.
D)extra production that occurs from hiring an extra worker.

Question 17

The marginal revenue from hiring an additional worker is known as

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

Question 18

Marginal revenue product is the

A)change in revenue from selling an extra item.
B)marginal revenue from hiring an additional worker.
C)extra product produced from spending marginal revenue on inputs.
D)change in revenue from the total production.

Question 19

The marginal revenue product is equal to the marginal

A)revenue multiplied by the wage.
B)revenue multiplied by output.
C)product of labor multiplied by the price of that product.
D)product of labor multiplied by the wage.

Question 20

The marginal revenue product of labor is equal to:

A)MP_L + P.
B)MR × Wage.
C)MR + Wage.
D)MP_L × P.

Question 21

The marginal cost of an additional worker is the change in

A)the company's total cost when one extra worker is hired.
B)total cost when one more unit of output is produced by an extra worker.
C)revenue minus the change in total cost when an extra worker is hired.
D)costs after adjustment for revenue due to an extra worker.

Question 22

An additional worker hired, produces extra output that is sold. The change in total revenue due to this is

A)marginal product revenue.
B)marginal revenue product.
C)worker marginal revenue.
D)worker marginal product.

Question 23

An employer should hire one more worker if

A)the total benefit exceeds the total cost.
B)the marginal cost is falling.
C)the marginal benefit exceeds the marginal cost.
D)demand is rising.

Question 24

Employers should hire more workers when the marginal revenue product is greater than (or equal to) the wage. This rule is known as the

A)Marginal Hiring Rule.
B)Labor Demand Rule.
C)Labor Maximization Guide.
D)Rational Rule for Employers.

Question 25

The Rational Rule for Employers says to hire more workers if

A)the marginal revenue product is greater than (or equal to) the wage.
B)the cost of workers is less than the revenue of workers.
C)worker skill exceeds worker wage.
D)output increase is sought and wage is falling.

Question 26

Use the data in Table: Pat's Pedicures to answer the question.
If Pat uses the Rational Rule for Employers, how many nail technicians will she hire?
$$\begin{array}{l}\text { Table: Pat's Pedicures (price } = \$ 25 \text { ) }\\\begin{array} { | l | l | l | } \hline \begin{array} { c } \text { Number of nail } \\\text { technicians (weekly } \\\text { wage \$450) }\end{array} & \begin{array} { c } \text { Marginal product } \\\text { (weekly) }\end{array} & \begin{array} { c } \text { Marginal revenue } \\\text { product }\end{array} \\\hline 1 & 30 & \$ 750 \\\hline 2 & 24 & \$ 600 \\\hline 3 & 18 & \$ 450 \\\hline 4 & 14 & \$ 350 \\\hline\end{array}\end{array}$$

A)one
B)two
C)three
D)four

Question 27

Use the data in Table: Larry's Lawn Mowing to answer the question.
If Larry uses the Rational Rule for Employers, how many workers will he hire?
$$\begin{array}{l}\text { Table: Larry's Lawn Mowing (price - \$30) }\\\begin{array} { | l | l | l | } \hline \begin{array} { c } \text { Number of workers } \\\text { (weekly wage \$540) }\end{array} & \begin{array} { c } \text { Marginal product } \\\text { (weekly) }\end{array} & \begin{array} { c } \text { Marginal revenue } \\\text { product }\end{array} \\\hline 1 & 24 & \$ 720 \\\hline 2 & 18 & \$ 540 \\\hline 3 & 14 & \$ 420 \\\hline 4 & 10 & \$ 300 \\\hline\end{array}\end{array}$$

A)one
B)two
C)three
D)four

Question 28

Use the data in Table: Wendy's Windows to answer the question.
If Wendy uses the Rational Rule for Employers, how many workers will she hire?
$\begin{array}{l}\text { Table: Wendy's Windows (price }=\$ 200 \text { ) }\\\begin{array}{|l|l|}\hline \begin{array}{c}\text { Number of } \\\text { workers (weekly } \\\text { wage } \$ 600)\end{array} & \begin{array}{c}\text { Marginal product } \\\text { (weekly) }\end{array} \\\hline 1 & 5 \\\hline 2 & 4 \\\hline 3 & 3 \\\hline 4 & 2 \\\hline\end{array}\end{array}$

A)one
B)two
C)three
D)four

Question 29

Use the data in Table: Wendy's Windows to answer the question.
What is the marginal revenue product of the second worker?
$\begin{array}{l}\text { Table: Wendy's Windows (price }=\$ 200 \text { ) }\\\begin{array}{|l|l|}\hline \begin{array}{c}\text { Number of } \\\text { workers (weekly } \\\text { wage } \$ 600)\end{array} & \begin{array}{c}\text { Marginal product } \\\text { (weekly) }\end{array} \\\hline 1 & 5 \\\hline 2 & 4 \\\hline 3 & 3 \\\hline 4 & 2 \\\hline\end{array}\end{array}$

A)$600
B)$800
C)$1,200
D)$2,400

Question 30

Use the data in Table: Wendy's Windows to answer the question.
What is the marginal revenue product of the fourth worker?
$\begin{array}{l}\text { Table: Wendy's Windows (price }=\$ 200 \text { ) }\\\begin{array}{|l|l|}\hline \begin{array}{c}\text { Number of } \\\text { workers (weekly } \\\text { wage } \$ 600)\end{array} & \begin{array}{c}\text { Marginal product } \\\text { (weekly) }\end{array} \\\hline 1 & 5 \\\hline 2 & 4 \\\hline 3 & 3 \\\hline 4 & 2 \\\hline\end{array}\end{array}$

A)$400
B)$600
C)$1,200
D)$2,400

Question 31

Alena manages a small theme park. She hires one more custodian at $450 per week, and her park is cleaner and more attractive. As a result of this improvement, ticket sales rise by 40 tickets per week. Tickets sell for $12. Use the Rational Rule for Employers to determine if hiring the extra custodian was a good move.

A)Yes, it was a good move because it added more to revenue than to cost.
B)Yes, it was a good move because the ticket sales rose more than price.
C)No, it was a bad move because it added more to cost than revenue.
D)No, it was a bad move because price did not rise as much as ticket sales.

Question 32

If an employer follows the Rational Rule for Employers, they will keep hiring additional workers until

A)minimum average cost is achieved.
B)marginal revenue equals zero.
C)revenue equals cost.
D)wage equals marginal revenue product.

Question 33

Use the data in Table: Carmin's Cones to answer the question.
Using the Rational Rule for Employers, the maximum profit Carmin could earn is _____. She would employ _____ workers to earn this profit.
$$\begin{array}{l}\text { Table: Carmin's Cones ( price } = \$ 8 \text { ) }\\\begin{array} { | l | l | l | l | } \hline \begin{array} { c } \text { Number of workers } \\\text { (weekly wage } \$ 400 )\end{array} & \begin{array} { c } \text { Marginal product } \\\text { (weekly) }\end{array} & \text { Number of cones sold } & \text { Profit } \\\hline 1 & 80 & 80 & \\\hline 2 & 63 & 143 & \\\hline 3 & 51 & 194 & \\\hline 4 & 40 & 234 & \\\hline\end{array}\end{array}$$

A)$344; two
B)$1,144; two
C)$352; three
D)$1,552; three

Question 34

Use the data in Table: Katia's Car Wash to answer the question.
When four workers are employed, the total revenue equals _____, and total cost equals _____.
$$\begin{array}{l}\text { Table: Katia's Car Wash (price } = \$ 8 \text { ) }\\\begin{array} { | l | l | l | l | } \hline \begin{array} { c } \text { Number of workers } \\\text { (weekly wage } \$ 400 )\end{array} & { \begin{array} { c } \text { Marginal product } \\\text { (weekly) }\end{array} } & { \begin{array} { c } \text { Number of cars } \\\text { washed }\end{array} } & \text { Profit } \\\hline 1 & 80 & 80 & \\\hline 2 & 65 & 145 & \\\hline 3 & 50 & 195 & \\\hline 4 & 40 & 235 & \\\hline\end{array}\end{array}$$

A)$3,200; $1,880
B)$1,560; $3,200
C)$320; $1,600
D)$1,880, $1,600

Question 35

Use the data in Table: Larry's Lawn Mowing to answer the question.
If three workers are employed, total revenue will equal _____, and total costs will be _____.
$$\begin{array}{l}\text { Table: Larry's Lawn Mowing (price } = \$ 30 \text { ) }\\\begin{array} { | l | l | l | } \hline \begin{array} { c } \text { Number of workers } \\\text { (weekly wage } \$ 540 \text { ) }\end{array} & \begin{array} { c } \text { Marginal product } \\\text { (weekly) }\end{array} & \begin{array} { c } \text { Marginal revenue } \\\text { product }\end{array} \\\hline 1 & 24 & \$ 720 \\\hline 2 & 18 & \$ 540 \\\hline 3 & 14 & \$ 420 \\\hline 4 & 10 & \$ 300 \\\hline\end{array}\end{array}$$

A)$1,680; $1,620
B)$420; $540
C)$1,260; $540
D)$1,980; $1,620

Question 36

The Rational Rule for Employers implies that they keep hiring until

A)revenue equals cost.
B)the wage equals marginal product.
C)the wage equals the marginal revenue product of the last worker hired.
D)marginal product equals marginal revenue.

Question 37

An employer's labor demand curve is equal to the

A)marginal revenue product curve.
B)marginal product curve.
C)marginal revenue curve.
D)rational product curve.

Question 38

The labor demand curve has a _____ slope because of _____.

A)downward; diminishing opportunity cost
B)downward; diminishing marginal product
C)upward; increasing opportunity cost
D)upward; increasing marginal product

Question 39

Why does an employer's labor demand curve slope downward?

A)diminishing product demand
B)substitution rule
C)diminishing marginal product
D)marginal cost adjustment

Question 40

Which of the following is an example of derived demand?

A)The demand for kitchen renovation affects the demand for carpenters.
B)The demand for nails affects the demand for saws.
C)The demand for accountants affects the demand for accounting services.
D)The demand for workout videos affects the demand for treadmills.

Question 41

Alex and Marilyn started Ono Yo, an organic and fresh fruit frozen yogurt truck. As the demand for organic and healthier desserts rose, demand for Ono Yo's products grew. Because of the growth in demand for Ono Yo's product, Alex's and Marilyn's

A)supply decreased.
B)demand for workers increased.
C)equilibrium quantity shifted to the left.
D)employee wages fell.

Question 42

If the demand for Ono Yo's organic frozen yogurt increases, then the _____ Ono Yo's workers will _____.

A)wages of; fall
B)demand for; hold steady
C)marginal revenue product of; increase
D)productivity of; rise

Question 43

When an increase in demand for stand-up paddleboards rises, then the demand for skilled paddleboard shapers _____, and their marginal revenue product _____.

A)falls; falls
B)falls; rises
C)rises; falls
D)rises; rises

Question 44

Your landscaping company uses labor and shovels. The price of shovels falls, and this _____ your demand for labor because labor and shovels are _____.

A)raises; complements
B)raises; substitutes
C)lowers; complements
D)lowers; substitutes

Question 45

Jenna is a concert pianist. A grand piano is a _____ to her labor in the production of her concerts.

A)derivation
B)substitute
C)complement
D)wage match

Question 46

As the price of scanners with high-resolution cameras dropped, Ford began using them instead of human inspectors to check the quality of the painted surfaces of its cars. What is the relationship between capital and labor in this example?

A)Labor and capital are substitutes in production.
B)Labor and capital are complements in production.
C)Labor and capital are scalers in production.
D)Labor and capital are production margins.

Question 47

An increase in the price of capital will _____ demand for labor if capital and labor are substitutes, and it will _____ the demand for labor if the scale effect dominates.

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

Question 48

Carlo implemented some management changes that increased worker productivity in his company. This increased the _____ and led him to _____ workers.

A)marginal product of labor; lay off some
B)marginal revenue product of labor; hire more
C)product demand; hire more
D)product price; lay off some

Question 49

After Giselle increased worker training at her company, the output per worker rose by 5%. What impact would this have on labor's marginal revenue product and her demand for labor?

A)Marginal revenue product would rise, and demand for labor would decrease.
B)Marginal revenue product would decrease, and demand for labor would increase.
C)Both marginal revenue product and demand for labor would increase.
D)Both marginal revenue product and demand for labor would decrease.

Question 50

Nora, the manager of three hospital rehabilitation clinics, has the clinics adopt software that allows better tracking of supplies. This software adoption also allows therapists to spend less time gathering supplies for therapy sessions. On average, each therapist can meet with one more patient per day. The marginal revenue product of the therapists will _____, and the demand for therapists at the clinics will _____.

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

Question 51

If a company incurs expenses to start providing childcare at work so that employees can have lunch with their preschool children, the company's demand curve for labor will shift to the

A)left because employees are more expensive to the firm.
B)right because employees are more expensive to the firm.
C)left because workers will be more loyal.
D)right because workers will be more loyal.

Question 52

When nonwage worker benefits are increased at a company, the company's demand for labor will _____ because employees are _____ to the company.

A)increase; more costly
B)decrease; more costly
C)increase; more valuable
D)decrease; less valuable

Question 53

Which of the following will NOT shift a company's demand curve for labor?

A)Change in the price of capital
B)Better management techniques
C)Change in the wage paid to workers
D)Change in the demand for the company's product

Question 54

Over long periods, the price elasticity of demand for labor becomes

A)unit elastic.
B)inelastic.
C)less elastic.
D)more elastic.

Question 55

The _____ principle explains why the loss of jobs due to automation in certain industries may create jobs in other industries.

A)interdependence
B)off-set
C)marginal
D)opportunity

Question 56

Who gains the most when robots replace workers?

A)Workers whose jobs were replaced by robots
B)Owners of robots
C)Owners of land
D)Teachers

Question 57

The long-run effect of laws that raise the minimum wage is that

A)any short-run effect disappears and there is no long-run impact.
B)the demand for minimum wage workers rises and more minimum wage workers are hired.
C)labor-saving devices and management practices are slowly adopted.
D)labor-saving devices are quickly adopted to replace labor.

Question 58

Consider the labor market, predict which of the following create an incentive for investment in capital?

A)Higher capital prices
B)Lower land prices
C)Lower wages
D)Higher wages

Question 59

When technology replaces low-skilled jobs in one industry, in the short-run, there is loss of low-skilled jobs. The long-run impact is:

A)higher productivity leading to a better standard of living.
B)higher wages in low-skilled jobs.
C)lower productivity leading to a worse standard of living.
D)the loss of jobs in other industries.

Question 60

Who gains and who loses when robots replace workers?

A)Displaced workers gain, and robot owners lose.
B)Robot owners gain, and displaced workers lose.
C)Low-wage workers gain, and robot manufacturers lose.
D)Workers gain, and robots lose.

Question 61

When robots replace workers in performing a particular task, productivity

A)and total output can fall because machines are not teachable like humans.
B)will rise, but the total output may fall because of tensions between workers and machines.
C)and total output can rise because displaced workers are now free to produce other things.
D)will fall because there is idle labor and reliance on machines.

Question 62

Technological change _____ productivity.

A)makes cyclical changes in
B)stabilizes
C)diminishes
D)boosts

Question 63

In a labor market, workers _____ labor, and employers _____ labor.

A)supply; demand
B)demand; supply
C)hire; use
D)use; hire

Question 64

An individual's time is divided into the two main categories of

A)work and play.
B)work and leisure.
C)leisure and production.
D)play and production.

Question 65

When you are working in the labor market, you are

A)demanding labor.
B)demanding a job.
C)supplying labor.
D)supplying a job.

Question 66

The opportunity cost of working is

A)what you can buy because you worked.
B)too high to even consider not working.
C)the wage you earn for the time spent working.
D)what you would have done during the time if you were not working.

Question 67

If a worker is deciding how many hours to work by asking, "Should I work one more hour?" then the worker is using the _____ principle to make the decision.

A)marginal
B)opportunity cost
C)cost-benefit
D)additive

Question 68

When deciding on the number of hours to work using the marginal principle, you are asking the question,

A)"How many total hours do I want to work?"
B)"Should I work one more hour?"
C)"How much could I buy if I work?"
D)"How much do I give up if I work?"

Question 69

When making labor supply decisions, your options are

A)working or doing housework.
B)working, shopping, or relaxing.
C)working or leisure.
D)working, sleeping, or leisure.

Question 70

What you forgo in order to work is the

A)wage of work.
B)labor supply.
C)marginal cost of working.
D)opportunity cost of working.

Question 71

The Rational Rule for Workers is to work

A)one more hour as long as the wage is at least as large as the marginal benefit of another hour of leisure.
B)as long as there is a desire for more income that exceeds the loss of income from not working.
C)as long as the marginal cost exceeds the marginal benefit.
D)one more hour as long as the wage exceeds the cost of necessities.

Question 72

The guideline to work one more hour as long as the wage is at least as large as the marginal benefit of another hour of leisure is known as the

A)Rational Rule for Employers.
B)Rational Rule for Workers.
C)Work-Leisure Principle.
D)Time Allocation Principle.

Question 73

The Rational Rule for Workers is based on the _____ principle.

A)opportunity-cost
B)labor demand
C)cost-benefit
D)transfer

Question 74

The benefit of working one more hour is

A)what you produce during the hour.
B)the leisure time you gain.
C)the experience you gain.
D)the wage you will earn during the hour.

Question 75

The cost of working one more hour is

A)the hour of leisure that is given up.
B)the wage earned.
C)the lost output due to inefficiency.

Question 76

If Bella uses the Rational Rule for Workers, she will keep choosing more work and less leisure until the

A)value of her production equals her wage.
B)marginal benefit of one more hour of leisure is equal to the wage.
C)marginal cost of her work equals the value of her production.
D)marginal benefit of one more hour of leisure is equal to the value of her production.

Question 77

When wages increase, the substitution effect makes work

A)more productive.
B)less productive.
C)more attractive.
D)less attractive.

Question 78

The substitution effect of a higher wage measures

A)the trade-off between production and inputs.
B)how people choose one of many possible occupations.
C)the trade-off between relative quantities.
D)how people respond to a change in relative prices.

Question 79

The _________________ measures how people respond to a change in relative prices when the wage rises.

A)substitution effect
B)income effect
C)opportunity cost
D)marginal benefit

Question 80

The income effect measures

A)the impact of change in relative prices.
B)how people's choices change when they have more income.
C)the change in welfare when income rises.
D)how people's choices change when they have to work more.