Question 1

Comment on the following statement: "An increase in the wage always leads to an increase in the quantity of labor supplied."

Accepted Answer

The answer of Comment on the following statement: "An increase...

Question 2

If the wage rate is below the equilibrium,then

Accepted Answer

If the wage rate is below the equilibrium, employers will find it profitable to hire more workers at the lower wage. This will increase the demand for labor, causing employers to bid up the wage to reach the equilibrium level. Therefore, choice B, the wage will be bid up by employers, is the correct answer. Choice A is incorrect because a decrease in the supply of labor would only occur if the wage was above the equilibrium level, not below it. Choice C is also incorrect because a situation of high unemployment would only occur if the wage was above the equilibrium level, not below it.

Question 3

Ignoring the income effect,an increase in the wage rate will cause an increase in labor supply.

Accepted Answer

According to the substitution effect, as the wage rate increases, individuals are incentivized to work more because the opportunity cost of leisure (the foregone wage) becomes higher. Therefore, the supply of labor increases. However, the income effect may also influence labor supply. If the wage increase is large enough, individuals may choose to work less because they can achieve their desired level of income with fewer hours worked. But ignoring the income effect, there is a positive relationship between the wage rate and labor supply.

Question 4

-Refer to Figure 17.2.If the hourly wage increases from $9 to $12,then

Accepted Answer

When the hourly wage increases, it makes working more attractive to potential employees, thus increasing the quantity of labor supplied as more people are willing to work or existing workers are willing to work more hours at the higher wage.

Question 5

As the dollar prizes for professional golf tournaments have increased,professional golfers have entered fewer tournaments per year.Is this type of behavior consistent with utility maximization? Explain.

Accepted Answer

The answer of As the dollar prizes for professional golf...

Question 6

If the hourly wage rate is above the equilibrium wage,then

Accepted Answer

When the hourly wage rate is above the equilibrium wage, it indicates that the wage rate is too high relative to the equilibrium point where the quantity of labor demanded is equal to the quantity of labor supplied. This means that the quantity of labor supplied is greater than the quantity of labor demanded, resulting in a surplus of labor. Employers would be willing to hire fewer workers at a higher wage rate, while employees would be willing to work more for a higher wage rate. As a result, there would be extra workers, leading to unemployment or underemployment.

Question 7

Suppose that you currently work 20 hours a week at $10 per hour and your employer tells you he must reduce your wage to $8 per hour.Using the concept of income and substitution effects,explain how you might react.

Accepted Answer

The answer of Suppose that you currently work 20 hours...

Question 8

Tyler's wage rises and he chooses to increase the number of hours he supplies to the labor market.What does this imply about the relative sizes of the substitution effect and the income effect? Explain.

Accepted Answer

The answer of Tyler's wage rises and he chooses to...

Question 9

-Refer to Figure 17.2.If the demand for labor decreases,then equilibrium wage will ________ and equilibrium quantity of hours will ________.

Accepted Answer

When the demand for labor decreases, the equilibrium wage decreases because employers are willing to pay less for labor, and the equilibrium quantity of hours worked also falls because there is less demand for workers.

Question 10

There is a negative relationship between the price of labor and the quantity of labor supplied,ceteris paribus.

Accepted Answer

Ceteris paribus, there is typically a positive relationship between the price of labor (wages) and the quantity of labor supplied, as higher wages incentivize more individuals to enter the workforce or offer more hours of work.

Question 11

Recall the Application about the response of New York City cab drivers to an increase in cab fares to answer the following question(s).
-Recall the Application.A study of the taxi market in New York City showed that in 2004,a 19 percent increase in the regulated fare

Accepted Answer

The increase in regulated fare likely led to a decrease in the miles driven per cabbie because drivers could achieve their target earnings in fewer miles, thus reducing the need to drive as much.

Question 12

We cannot easily predict whether an increase in the wage will cause a worker to demand more leisure time or less leisure time.

Accepted Answer

The substitution effect and the income effect work in opposite directions when wages increase, making it difficult to predict whether a worker will demand more or less leisure time without specific information about their preferences and circumstances.

Question 13

How does occupational licensing affect the labor market for a particular occupation?

Accepted Answer

The answer of How does occupational licensing affect the labor...

Question 14

-Refer to Figure 17.2.If the supply of labor increases,then equilibrium wage will ________ and equilibrium quantity of hours will ________.

Accepted Answer

An increase in the supply of labor typically leads to a decrease in the equilibrium wage due to the higher availability of workers, and an increase in the equilibrium quantity of hours worked as employers take advantage of the lower wage to hire more labor.

Question 15

-Refer to Figure 17.2.If the demand for labor increases,then equilibrium wage will ________ and equilibrium quantity of hours will ________.

Accepted Answer

When the demand for labor increases, it means that employers are willing to hire more workers at each wage level. This leads to an increase in the equilibrium wage because workers are in higher demand, and also leads to an increase in the equilibrium quantity of hours worked as more labor is hired.

Question 16

Explain the income effect and the substitution effect due to an increase in the wage rate.

Accepted Answer

The answer of Explain the income effect and the substitution...

Question 17

-Refer to Figure 17.2.If the supply of labor decreases,then equilibrium wage will ________ and equilibrium quantity of hours will ________.

Accepted Answer

A decrease in the supply of labor will lead to an increase in the equilibrium wage due to the reduced availability of labor, and a decrease in the equilibrium quantity of hours worked because there are fewer workers available.

Question 18

Higher wages could lead workers to choose to work less hours.

Accepted Answer

The concept of the "income effect" suggests that when wages increase, workers may choose to work less hours and instead prioritize other activities like leisure. This is because with higher wages, workers can meet their financial needs with less time spent working.

Question 19

-Refer to Figure 17.2.If the hourly wage is $15,then

Accepted Answer

The answer of 
-Refer to Figure 17.2.If the hourly wage...

Question 20

An increase in the wage rate means that the opportunity cost of leisure has fallen.

Accepted Answer

An increase in the wage rate means that the opportunity cost of leisure has risen because now, the worker can earn more income by working instead of taking leisure time. This means that the worker has to give up more leisure time if they choose to work, making leisure time more expensive in terms of foregone wages.

Quiz 17: The Labor Market and the Distribution of Income