Deck 7: Competitive Equilibrium

Question 1

Suppose instead of the subsidy,the government imposes a tax on workers of $4 per hour.What is the new equilibrium wage in the steel industry?

A) $8
B) $9
C) $10
D) $13
E) $15

Answer 1

B

Question 2

If workers are perfectly mobile,what will be the wage of the chef at the fancy restaurant?

A) $5
B) $6
C) $7
D) $8
E) $9

Answer 2

D

Question 3

Suppose the state government increases the payroll tax by $1.What will happen to the labor market equilibrium?

A) The labor demand schedule shifts downward.
B) The labor demand schedule shifts upward.
C) The labor supply schedule shifts downward.
D) The labor supply schedule shifts upward.
E) The labor demand and labor supply schedule both shift downward.

Answer 3

A

Question 4

Which of the following does not occur in a competitive equilibrium?

A) The demand for labor will be perfectly elastic.
B) The supply of labor will be perfectly elastic.
C) If there's an increase in the supply of labor,wages will adjust appropriately.
D) When the supply of labor decreases,the hours worked by individuals will adjust.
E) When the demand for labor increases,the firms will not adjust the number of workers employed.

Question 5

Suppose the government imposes an employment subsidy of $4 per worker per hour.What is the new equilibrium wage?

A) $8
B) $9
C) $10
D) $13
E) $15

Question 6

How many workers are employed in the steel industry?

A) 19
B) 20
C) 23
D) 25
E) 27

Question 7

After the $4 subsidy is imposed,how many individuals work in the steel industry?

A) 19
B) 20
C) 23
D) 25
E) 27

Question 8

What is the equilibrium wage?

A) $5
B) $7
C) $10
D) $13
E) $15

Question 9

After the $4 tax is imposed,how many individuals work in the steel industry?

A) 19
B) 20
C) 23
D) 25
E) 27

Question 10

If workers are perfectly mobile,what will be the wage of the typical chef in a diner?

A) $5
B) $6
C) $7
D) $8
E) $9

Question 11

How many chefs will work in the fancy restaurant?

A) 4 workers
B) 8 workers
C) 12 workers
D) 14 workers
E) 16 workers

Question 12

Suppose Daniel can work in an unsafe factory for $15,but works in a restaurant as a busboy for $11.What is the reservation value of safety?

A) $4
B) $9
C) $11
D) $13
E) $26

Question 13

How many chefs will work in the diner?

A) 6 workers
B) 8 workers
C) 12 workers
D) 14 workers
E) 20 workers

Question 14

If the government decreases the payroll tax,then the equilibrium wage will and the employment level will .

A) decrease,decrease
B) decrease,increase
C) increase,increase
D) increase,decrease
E) remain the same,decrease

Question 15

Suppose there is a payroll tax placed on firms.If labor supply is perfectly elastic,then

A) firms and workers will split the payroll tax 50-50.
B) workers will bear 75% of the tax burden.
C) workers will bear 100% of the tax burden.
D) firms will bear 100% of the tax burden.
E) firms will bear 75% of the tax burden.

Question 16

The starting salary for a garbage hauler is about $60,000 more than a teacher.Which of the following terms explains this difference?

A) Pareto optimal
B) payroll tax
C) reservation value
D) compensating wage differential
E) competitive Equilibrium

Question 17

The competitive equilibrium is

A) fair.
B) efficient.
C) equitable.
D) unaffected by shifts in labor demand.
E) unaffected by shifts in labor supply.

Question 18

Suppose the government decreases the federal income tax.What happens to the labor market equilibrium?

A) The labor demand schedule shifts downward.
B) The labor demand schedule shifts upward.
C) The labor supply schedule shifts downward.
D) The labor supply schedule shifts upward.
E) The labor demand and labor supply schedule both shift downward.

Question 19

In a competitive equilibrium,workers are and firms are .

A) price setters,price setters
B) price setters,price takers
C) price takers,price takers
D) price takers,price setters
E) price neutral,price setters

Question 20

Suppose there is an increase in the supply of labor.This will cause the equilibrium wage to ,hours worked to ,and quantity of labor demanded to .

A) decrease,decrease,increase
B) decrease,increase,increase
C) decrease,increase,decrease
D) increase,decrease,increase
E) increase,increase,decrease

Question 21

Which of the following is a true statement about competitive labor markets?

A) Fringe benefits will never arise in a competitive labor market.
B) Workers of the same skill level will earn different prices.
C) Payroll taxes are levied on employees.
D) Adjustments along the intensive margin arise when firms enter the market.
E) In a competitive labor market,all participants are price takers.

Question 22

The compensating wage differential is:

A) the pay a worker receives for working overtime.
B) health insurance and other non pecuniary benefits all workers receive.
C) the extra wage given to compensate workers for bad working conditions.
D) the extra wage that will cause all workers to accept bad working conditions.
E) the higher wage caused by government interventions such as the minimum wage.

Question 23

What is the equilibrium compensating wage differential for the farmer?

A) $5K
B) $10K
C) $20K
D) $25K
E) $40K

Question 24

When there are compensating wage differentials,

A) individuals no longer maximize utility.
B) firms no longer maximize profits.
C) all workers receive the same non pecuniary benefits.
D) workers are homogeneous.
E) there are a large number of firms.

Question 25

Why are there differing results in problems 22 and 23?

A) The average worker changed.
B) The marginal worker changed.
C) The median worker changed.
D) Individuals are not behaving rationally.
E) Employers are not profit-maximizing.

Question 26

Suppose the wage for secretaries increases to .What is the equilibrium compensating wage differential for farmers?

A) $10K
B) $25K
C) $50K
D) $55K
E) $60K

Question 27

Which of the following is an example of a fringe benefit?

A) overtime
B) Christmas bonus
C) raises
D) federal holidays off
E) paid dental benefits

Question 28

If comparable workers need to be paid $5 more an hour to bus tables than to be a waiter,then:

A) the value of being a waiter is worth at least $5 for all workers.
B) the value of being a waiter is worth more than $5 for all workers.
C) the value of being a waiter is worth exactly $5 for all workers.
D) the value of being a waiter is worth at least $5 for some workers.
E) the value of being a busboy is worth $5 for all workers.

Question 29

Which of the following statements are not true?

A) Fringe benefits include health insurance and pension plans.
B) Workers all value fringe benefits the same.
C) Wage benefits are predicted to lie along a line with a slope of -1.
D) Employers are indifferent between any equally costly wage benefit combination.
E) Fringe benefits arise from a voluntary agreement between workers and employers.

Question 30

If a firm makes adjustments to create a safer working environment,then

A) workers will demand higher wages.
B) workers will accept lower wages.
C) the firm will attract more skilled workers.
D) the firm is no longer maximizing profits.
E) answers B and D

Question 31

Who governs the compensating differential?

A) the employer
B) the average worker
C) the marginal worker
D) the median worker
E) the government

Question 32

Suppose a firm currently offers workers $60K a year without health care benefits.The workers want health insurance and are willing to take a pay cut to get the benefit.Which of the following employment packages does the employer value equally to the current employment package?

A) $70K salary and $30K in health benefits
B) $60K salary and $30K in health benefits
C) $40K salary and $30K in health benefits
D) $30K salary and $30K in health benefits
E) $10K salary and $30K in health benefits

Question 33

Instead of a wage increase,members of a police union agreed to keep the same pay in exchange for a 20-year retirement program.What is this an exmaple of?

A) fringe benefits
B) Pareto optimality
C) efficiency
D) compensating wage differential
E) A and D

Question 34

Which of the following is an example of changes along the intensive margin?

A) A firm hires more workers because demand for the good has increased.
B) A new firm closes because a recession causes sales to drop too low.
C) A worker leaves her job to stay at home with her children.
D) After the iPhone was developed,several competitors entered to earn a profit.
E) Consumers demand more high-definition TVs,so the price of other types of
TVs decreases.