Question 1

If a union is able to bargain for a wage that is higher than the equilibrium:

Accepted Answer

If a union is able to bargain for a wage higher than the equilibrium, it means they have secured a wage rate above the market-clearing wage. This creates a situation of excess supply of labor or unemployment since there will be more workers willing to work at the higher wage but fewer employers are willing to hire at that higher wage, resulting in a surplus of labor. This situation arises from the union's bargaining power that exceeds the free-market forces of supply and demand.

Question 2

(Scenario: The Decision to Hire Labor)Use Scenario: The Decision to Hire Labor.How many workers will this perfectly competitive,profit-maximizing firm choose to hire if the equilibrium wage is $30? Scenario: The Decision to Hire Labor
Assume that both the product market and the labor market are perfectly competitive.The price of this firm's product is $5.The firm's total product with respect to labor is given in the table that follows.

Accepted Answer

The answer of (Scenario: The Decision to Hire Labor)Use Scenario:...

Question 3

When each factor is paid an amount equal to the value of the marginal product of the last unit of that factor employed in the factor market as a whole,this is:

Accepted Answer

This describes the marginal productivity theory of income distribution, which suggests that each factor of production (such as land, labor, and capital) earns a share of the income equal to the value of the marginal product they contribute to production. This means that if the last unit of labor added to a production process increases output by $10, then the worker should be paid $10 for their contribution.

Question 4

Within the labor-leisure framework,when an individual's income effect is stronger than the substitution effect from a wage increase,it means they have a(n):

Accepted Answer

A stronger income effect than substitution effect means that the individual will work less as their real income has increased, which results in a downward-sloping labor supply curve in the wage range in question.

Question 5

In a given perfectly competitive labor market,the equilibrium wage:

Accepted Answer

In a perfectly competitive labor market, all workers have the same skills and abilities, making them perfect substitutes for each other. Therefore, the equilibrium wage is the same for all workers in that labor market.

Question 6

Large disparities in wages are often used as:

Accepted Answer

Large disparities in wages suggest that the marginal productivity theory of income distribution may not fully explain the variations in wages. This theory suggests that individuals are paid according to their marginal contribution to production, but large disparities in wages may suggest that other factors, such as discrimination or unequal bargaining power, are impacting wage distribution.

Question 7

A person's optimal labor supply choice:

Accepted Answer

A person's optimal labor supply choice is similar to their optimal consumption rule in that it involves maximizing satisfaction subject to constraints. In the case of labor supply, the goods being considered are leisure and income, and the person must choose the combination of the two that maximizes their overall utility. Therefore, option A is the correct answer.

Question 8

(Scenario: The Decision to Hire Labor)Use Scenario: The Decision to Hire Labor.If this profit-maximizing firm hires two workers,what is a possible equilibrium wage rate in the labor market? Scenario: The Decision to Hire Labor
Assume that both the product market and the labor market are perfectly competitive.The price of this firm's product is $5.The firm's total product with respect to labor is given in the table that follows.

Accepted Answer

The answer of (Scenario: The Decision to Hire Labor)Use Scenario:...

Question 9

In the factor market for land,equilibrium rental prices will be _____ the value of marginal product of land.

Accepted Answer

In the factor market for land, equilibrium rental prices will be equal to the value of marginal product of land. This is because in the long run, competitive markets ensure that factors of production are paid their marginal product. If rental prices were less than the value of marginal product, then firms would demand more land than is available, leading to a shortage of land. On the other hand, if rental prices were greater than the value of marginal product, then firms would not be willing to rent the land, leading to a surplus of land. Therefore, the equilibrium is where rental prices are equal to the value of marginal product of land.

Question 10

People who have higher levels of human capital will tend to:

Accepted Answer

Human capital refers to a person's knowledge, skills, and abilities that contribute to their productivity in the workforce. Individuals with higher levels of human capital are often more productive and valuable to employers, which leads to higher wages and salaries.

Question 11

(Scenario: The Decision to Hire Labor)Use Scenario: The Decision to Hire Labor.Holding everything else constant,if the demand for this firm's product decreases: Scenario: The Decision to Hire Labor
Assume that both the product market and the labor market are perfectly competitive.The price of this firm's product is $5.The firm's total product with respect to labor is given in the table that follows.

Accepted Answer

When the demand for the firm's product decreases, the firm's value of marginal product (VMP) curve shifts to the left. This means that the firm's marginal product of labor (MPL) decreases and the firm is willing to pay less for each additional worker. As a result, the firm will hire fewer workers to produce the same level of output. Therefore, the correct answer is C.

Question 12

Leisure is considered a normal good since people:

Accepted Answer

According to the definition of a normal good, as income rises, the demand for the good increases. In the case of leisure, people can consume more of it when their income rises, for example by taking more vacations or reducing working hours.

Question 13

When a person receives a wage increase,changes in his or her labor supply depend on:

Accepted Answer

When a person receives a wage increase, there are two effects that determine the change in labor supply: the substitution effect and the income effect. The substitution effect occurs when the wage increase makes working more attractive compared to leisure time, so the person increases their labor supply. The income effect occurs because the wage increase increases the person's income, making them able to afford more leisure time. This can cause the person to decrease their labor supply. The overall effect on labor supply depends on which effect is stronger.

Question 14

If a person's marginal utility from an additional hour of leisure is less than the marginal utility gained from goods bought with the wages earned from an additional hour of labor,then this person should:

Accepted Answer

The principle of marginal analysis suggests that individuals maximize their utility by equating the marginal utility of leisure with the marginal utility of goods and services bought with wages. If the marginal utility from an additional hour of leisure is less than the marginal utility from goods bought with wages earned from an additional hour of labor, it implies that working more will increase the person's overall utility. Therefore, the person should work more.

Question 15

Time allocation refers to:

Accepted Answer

Time allocation refers to how individuals choose to spend their time on different activities, such as work, leisure, or household responsibilities. It is a personal decision and can vary based on individual preferences, obligations, and constraints. Therefore, option B is the correct choice. Options A, C, and D are not relevant to the concept of time allocation.

Question 16

(Scenario: The Decision to Hire Labor)Use Scenario: The Decision to Hire Labor.This firm experiences diminishing marginal product after it hires the _____ worker. Scenario: The Decision to Hire Labor
Assume that both the product market and the labor market are perfectly competitive.The price of this firm's product is $5.The firm's total product with respect to labor is given in the table that follows.

Accepted Answer

The answer of (Scenario: The Decision to Hire Labor)Use Scenario:...

Quiz 19: Factor Markets and the Distribution of Income

If a union is able to bargain for a wage that is higher than the equilibrium:

When each factor is paid an amount equal to the value of the marginal product of the last unit of that factor employed in the factor market as a whole,this is:

Within the labor-leisure framework,when an individual's income effect is stronger than the substitution effect from a wage increase,it means they have a(n) :

In a given perfectly competitive labor market,the equilibrium wage:

Large disparities in wages are often used as:

A person's optimal labor supply choice:

In the factor market for land,equilibrium rental prices will be _____ the value of marginal product of land.

People who have higher levels of human capital will tend to:

Leisure is considered a normal good since people:

When a person receives a wage increase,changes in his or her labor supply depend on:

If a person's marginal utility from an additional hour of leisure is less than the marginal utility gained from goods bought with the wages earned from an additional hour of labor,then this person should:

Time allocation refers to: