Question 1

The quantity of labor supplied is dependent on the size of the working population and the wage rate.

Accepted Answer

The size of the working population and the wage rate are two factors that directly affect the quantity of labor supplied. A higher wage rate generally leads to a greater quantity of labor supplied, while a smaller working population may lead to a smaller quantity of labor supplied.

Question 2

Expenditures for attending college can be viewed as an investment in human capital.

Accepted Answer

Expenditures for attending college, such as tuition, books, and living expenses, are viewed as an investment in human capital because they are expected to increase the individual's future earning potential and overall economic success.

Question 3

Some economists believe that education's primary function is to sort individuals by their ability rather than increase their productivity.

Accepted Answer

According to the sorting theory of education, the primary function of education is to identify and sort individuals based on their innate abilities, rather than to increase their productivity or enhance their skills.

Question 4

Since women earn less on average than men,we would expect that the substitution effect of a wage change would be more likely to dominate for women and the income effect would be more likely to dominate for men.

Accepted Answer

The substitution effect of a wage change refers to the change in relative prices of goods and services, while the income effect refers to the change in the amount of goods and services that can be purchased. Since women earn less on average, a wage increase would have a greater impact on their ability to purchase more goods and services, making the income effect more likely to dominate. On the other hand, for men who earn more on average, a wage increase would lead to a smaller increase in their ability to purchase goods and services, making the substitution effect more likely to dominate.

Question 5

The salary of an athlete like Peyton Manning is in part a reward for his unique ability-something economists call economic rent.

Accepted Answer

Economic rent refers to the extra income earned by an individual due to their unique abilities or talents, which gives them a monopoly in the market. Therefore, the salary of an athlete like Peyton Manning can be considered economic rent.

Question 6

The supply of workers in an industry is influenced by the available working population and the nonmonetary attractiveness of the job.

Accepted Answer

The supply of workers in an industry is influenced by both the available working population and the nonmonetary factors such as job satisfaction, work-life balance, and job security, which affect the attraction of workers to a particular job or industry.

Question 7

The substitution effect makes workers want to work less when the wage increases.

Accepted Answer

The substitution effect states that when the wage increases, workers will want to work more to take advantage of the higher wage. This is because the opportunity cost of not working (i.e. giving up the higher wage) has increased.

Question 8

One implication of human capital theory is that college graduates should earn substantially less than high school graduates.

Accepted Answer

Human capital theory suggests that individuals who invest in higher education and acquire additional skills and knowledge should have higher earning potential than those with less education. Therefore, college graduates are expected to earn more than high school graduates in most cases.

Question 9

Earnings of some highly skilled or highly specialized persons can be classified as economic rents.

Accepted Answer

Economic rent refers to the income earned by a factor of production (such as labor or land) that is above and beyond what would be necessary to keep that factor in its current use. In other words, it is a "surplus" income that is earned due to scarcity or uniqueness of the factor. Therefore, earnings of some highly skilled or highly specialized persons can be classified as economic rents.

Question 10

The income effect is thought to offset the substitution effect among very high wage earners.

Accepted Answer

Very high wage earners have a higher income elasticity of demand, meaning that as their income increases, their demand for certain goods may increase as well, offsetting any substitution effect caused by a change in prices.

Question 11

Anything that influences a good's price or the marginal physical product of labor will influence wages.

Accepted Answer

Wages are influenced by various factors, including the price of goods produced by a company or industry and the marginal physical product of labor, which refers to the additional output produced by each additional unit of labor. If the price of goods increases or the marginal physical product of labor increases, it can lead to an increase in wages. Conversely, if the price or marginal product decreases, wages may decrease as well.

Question 12

Economic rents can lead to large wage differentials.

Accepted Answer

Economic rents are profits or incomes earned above what is necessary to maintain a certain level of production or investment. When certain jobs or industries are able to earn large economic rents, it can create wage differentials between those in that industry and those in other industries or occupations. For example, professional sports players may earn much higher wages than other occupations due to the large economic rents generated by the sports industry.

Question 13

The monetary return on a college education is considered economic rent.

Accepted Answer

The answer of The monetary return on a college education...

Question 14

Wages will tend to be high in labor markets where supply is relatively high and demand is relatively weak.

Accepted Answer

Wages will tend to be low in labor markets where supply is relatively high and demand is relatively weak. High supply and weak demand means there are more workers than available jobs, which leads to competition for jobs and lower wages.

Question 15

The substitution effect is thought to dominate the behavior of low-wage workers.

Accepted Answer

The substitution effect suggests that low-wage workers will choose to work more hours as the wage rate increases, because the higher wage makes the opportunity cost of leisure time higher. This is especially true for low-wage workers as they are more sensitive to changes in wage rates compared to higher-wage workers. Therefore, the substitution effect is considered to dominate the behavior of low-wage workers.

Question 16

If the income effect of a change in the wage dominates the substitution effect,then workers will want to work more when the wage increases.

Accepted Answer

If the income effect dominates the substitution effect, workers may choose to work less as their wage increases because they can maintain the same standard of living with less work.

Question 17

Spending on an education is considered an investment because it involves a sacrifice of current income for higher expected future income.

Accepted Answer

Spending on education is an investment because it involves sacrificing current income in exchange for increased earning potential in the future. This increased earning potential is expected to result in a higher future income, making the investment in education a sound financial decision.

Question 18

Wages are comparatively low in markets where demand for labor is low and supply is high.

Accepted Answer

This is because when there is an excess supply of labor, employers have more options to choose from and can offer lower wages without risking losing potential employees to other job offers.

Question 19

An investment in yourself is an investment in what economists call human capital.

Accepted Answer

Economists define human capital as the skills, knowledge, and experience possessed by an individual that contribute to their ability to produce economic value. Investing in oneself through education, skill-building, or personal development can increase one's human capital and lead to increased earning potential in the long run.

Question 20

An individual's supply curve is backward bending.

Accepted Answer

It is possible for an individual's supply curve to be backward bending, which means that as the price of a good or service increases, the individual may initially increase their supply, but eventually reach a point where they start to decrease their supply because of factors such as fatigue, the opportunity cost of other activities, or limited resources. This is in contrast to a typical upward-sloping supply curve, where higher prices lead to increased supply at all levels.

Quiz 20: Labor and Entrepreneurship: The Human Inputs