Question 1

We assume an upward sloping supply curve because:

Accepted Answer

The upward-sloping supply curve is based on the assumption that as prices increase, producers are willing to supply more of a good, which is largely due to the price effect dominating labor supply decisions in the real world. This effect incentivizes producers to increase production as the selling price rises, making it more profitable to produce additional units.

Question 2

If the graph shown is displaying a competitive labor market:

Accepted Answer

The answer of  If the graph shown is displaying...

Question 3

In order to see how the labor market works as a whole,we need to add up all the:

Accepted Answer

To understand the labor market as a whole, we need to consider the market level supply and demand, which can be derived by adding up the supply curves of individual workers and the demand curves of individual firms. This will help us understand the wage levels and employment levels in the entire labor market. Option B is incorrect because taking the weighted average of observed equilibrium wages across all individual markets assumes that all individual labor markets are the same size, which may not be true in reality. Option C is incorrect because the demand curves of individual workers do not exist as workers are the suppliers of labor, and it is firms who create demand for labor.

Question 4

Sadie works at a factory for $15 an hour and typically works 40 hours a week.Sadie gets a pay raise and now earns $20 an hour.She decides to work 45 hours a week at $20 an hour.Her response to the pay increase demonstrates the:

Accepted Answer

The price effect outweighs the income effect in this scenario since Sadie chose to work more hours at the higher wage, demonstrating that the increased wage rate had a greater impact on her decision to work than the additional income she could earn by working fewer hours.

Question 5

In general in the real world labor market the:

Accepted Answer

In the real world labor market, the price effect usually dominates, leading to an upward sloping supply curve. This means that as wages increase, people are generally willing to supply more labor.

Question 6

A firm deciding how many hours to hire can be represented:

Accepted Answer

A firm deciding how many hours to hire is represented by an individual labor-demand curve, as it reflects the firm's demand for labor based on wage rates and other factors.

Question 7

An individual labor-supply curve represents:

Accepted Answer

An individual labor-supply curve represents a worker's decisions around how many hours to work at each alternative wage. It shows how the quantity of labor supplied by a worker changes as the wage rate changes.

Question 8

All of the following are true of the labor-supply and labor-demand curves intersection except they:

Accepted Answer

The intersection of labor-supply and labor-demand curves determines the equilibrium wage and employment level, not the revenue-maximizing quantity.

Question 9

If the graph shown is displaying a competitive labor market:

Accepted Answer

In a competitive labor market, the demand for jobs would be represented by the supply curve (S) and the supply of jobs would be represented by the demand curve (D). The equilibrium point where they intersect (P*) would represent the wage at which the quantity of labor supplied equals the quantity of labor demanded. Therefore, C is the correct answer. D would represent the quantity of employment at the equilibrium wage, but it is not the maximum possible employment for the market.

Question 10

If Sam receives a pay cut and the income effect outweighs the price effect on his labor supply decision,he will:

Accepted Answer

The answer of If Sam receives a pay cut and...

Question 11

If Tony receives a pay raise and the price effect outweighs the income effect on his labor supply decisions,he will:

Accepted Answer

If the price effect outweighs the income effect, it means that the increase in hourly wage encourages Tony to work more hours despite the fact that he has the option to work fewer hours due to his increased income. Therefore, he will work more hours.

Question 12

Wes works as a delivery man and can work as many hours as he likes for $12 an hour.He typically works 40 hours a week.Recently,his pay has been cut,and Wes decides to work:

Accepted Answer

When Wes's pay is cut, he needs to work more hours to maintain his income level, indicating that the income effect dominates his labor supply decision.

Question 13

An individual labor-demand curve represents:

Accepted Answer

An individual labor-demand curve represents a firm's decisions around how many hours to hire at each alternative wage. It shows the relationship between the wage rate offered and the quantity of labor demanded by a particular firm. The curve illustrates the firm's willingness to hire more or fewer workers at different wage rates, holding all other factors constant.

Question 14

If Jay receives a pay cut and the price effect outweighs the income effect on his labor supply decisions,he will work:

Accepted Answer

When Jay receives a pay cut, he will be incentivized to work more hours due to the income effect. However, the price effect will also lower the incentive to work, leading him to work fewer hours. If the price effect outweighs the income effect, meaning the decrease in the incentive to work is greater than the increase in the incentive to work, then Jay will work less hours. Therefore, the answer is B, less hours.

Question 15

Sadie works at a factory for $15 an hour and typically works 40 hours a week.Sadie gets a pay raise and now earns $20 an hour.She decides to work 45 hours a week at $20 an hour.Her response:

Accepted Answer

The statement implies that Sadie's decision to work longer hours at a higher wage indicates that the price effect of the pay raise (the incentive to work more due to higher wages) outweighed the income effect (the reduction in the need to work due to a higher income). This is an upward sloping labor supply curve. This decision is typically observed.

Question 16

The labor-supply and labor-demand curves for the market intersect:

Accepted Answer

When the labor-supply and labor-demand curves for the market intersect, they do so at the equilibrium wage, which is the market-clearing wage that ensures that the quantity of labor supplied equals the quantity of labor demanded. The other options (B and C) are not necessarily true and do not accurately describe the intersection of the labor-supply and labor-demand curves.

Question 17

Julie works at a local hat factory for $12 an hour and typically works 40 hours a week.The company threatens layoffs,so Julie and the others agree to a pay cut.Julie now earns $10 an hour and works every hour over 40 that her boss will let her.Julie's response to this pay cut was to work:

Accepted Answer

Julie's response to the pay cut was to work more, which demonstrates a dominant income effect. This means that despite the reduction in her pay rate, Julie still values the income she can earn from working more hours above the leisure time she would have without working those extra hours. Therefore, she is willing to work more to make up for the pay cut and maintain her income level.

Question 18

If Donald receives a pay raise and the income effect outweighs the price effect on his labor supply decisions,he will work:

Accepted Answer

If the income effect outweighs the price effect, Donald will feel wealthier and may choose to work fewer hours because he can maintain his desired standard of living with less work.

Question 19

If the graph shown is displaying a competitive labor market:

Accepted Answer

In a competitive labor market, Q* would represent total employment in the market, S would represent the workers' willingness to supply labor at every wage, and P* would represent the equilibrium wage. Therefore, all three statements are true.

Question 20

A worker deciding how many hours to work can be represented:

Accepted Answer

A worker deciding how many hours to work is an individual decision, and therefore can be represented by an individual labor-supply curve. This curve shows how many hours the worker is willing and able to work at different wage rates. The market labor-supply curve reflects the collective labor-supply decisions of all workers in the market, and the individual labor-demand curve and market labor-demand curve represent the employer's decision-making process.

Quiz 16: The Factors of Production

We assume an upward sloping supply curve because:

If the graph shown is displaying a competitive labor market:

In order to see how the labor market works as a whole,we need to add up all the:

Sadie works at a factory for $15 an hour and typically works 40 hours a week.Sadie gets a pay raise and now earns $20 an hour.She decides to work 45 hours a week at $20 an hour.Her response to the pay increase demonstrates the:

In general in the real world labor market the:

A firm deciding how many hours to hire can be represented:

An individual labor-supply curve represents:

All of the following are true of the labor-supply and labor-demand curves intersection except they:

If the graph shown is displaying a competitive labor market:

If Sam receives a pay cut and the income effect outweighs the price effect on his labor supply decision,he will:

If Tony receives a pay raise and the price effect outweighs the income effect on his labor supply decisions,he will:

Wes works as a delivery man and can work as many hours as he likes for $12 an hour.He typically works 40 hours a week.Recently,his pay has been cut,and Wes decides to work:

An individual labor-demand curve represents:

If Jay receives a pay cut and the price effect outweighs the income effect on his labor supply decisions,he will work:

Sadie works at a factory for $15 an hour and typically works 40 hours a week.Sadie gets a pay raise and now earns $20 an hour.She decides to work 45 hours a week at $20 an hour.Her response:

The labor-supply and labor-demand curves for the market intersect:

Julie works at a local hat factory for $12 an hour and typically works 40 hours a week.The company threatens layoffs,so Julie and the others agree to a pay cut.Julie now earns $10 an hour and works every hour over 40 that her boss will let her.Julie's response to this pay cut was to work:

If Donald receives a pay raise and the income effect outweighs the price effect on his labor supply decisions,he will work:

If the graph shown is displaying a competitive labor market:

A worker deciding how many hours to work can be represented: