Question 1

The aggregate supply of labor is the

Accepted Answer

The aggregate supply of labor refers to the total amount of labor supplied by all people in the economy.

Question 2

The marginal product of labor (measured in units of output)of a firm is given by
MPN = A(2000 -
N)where A measures productivity and N is the number of labor hours used in production.Suppose the price of output is $6 per unit and A = 0.002.(a)	What will be the demand for labor if the nominal wage is $18? (b)	What will be the demand for labor if the nominal wage rises to $21?

Accepted Answer

The answer of The marginal product of labor (measured in...

Question 3

A permanent increase in the real wage rate has a ________ income effect on labor supply than a temporary increase in the real wage,so labor supply is ________ with a permanent wage increase than for a temporary wage increase.

Accepted Answer

A permanent increase in the real wage rate has a larger income effect on labor supply than a temporary increase, leading individuals to value leisure more compared to work. As a result, labor supply is less with a permanent wage increase than for a temporary wage increase, because people can afford to work less while maintaining their desired standard of living.

Question 4

The tendency of workers to supply more labor in response to a larger reward for working is called the ________ of a higher real wage on the quantity of labor supplied.

Accepted Answer

This statement refers to the substitution effect, which suggests that as wages increase, workers will substitute leisure time for work time because work has become relatively more attractive. This is distinct from the income effect, which suggests that as wages increase, workers will enjoy an increase in income, and some may choose to work fewer hours (and enjoy more leisure time) because they can now make ends meet with fewer hours of work.

Question 5

As a result of the superb economics essay that you wrote during this quarter,you won the Adam Smith prize of $100.The receipt of these funds would be an example of

Accepted Answer

The receipt of the Adam Smith prize is an example of a pure income effect because it is a direct increase in income that does not result in any change in relative prices or preferences.

Question 6

A person is more likely to increase labor supply in response to an increase in the real wage,the ________ is the income effect and the ________ is the substitution effect.

Accepted Answer

The substitution effect, which makes leisure more expensive relative to work, tends to increase labor supply as real wages rise. The income effect, which increases overall income, might reduce labor supply by allowing a person to afford more leisure. Therefore, a larger substitution effect relative to a smaller income effect would more likely increase labor supply.

Question 7

Research on labor supply generally shows that

Accepted Answer

The answer of Research on labor supply generally shows that
...

Question 8

A winter ice storm has paralyzed the entire east coast,reducing productivity sharply.This supply shock shifts the marginal product of labor curve

Accepted Answer

The winter ice storm has reduced productivity, which means that firms will produce less output for any given amount of labor input. This will cause a decrease in the marginal product of labor, shifting the MPL curve down and to the left. As a result, the demand for labor will decrease at any given real wage, leading to a reduction in the quantity of labor demanded.

Question 9

A technological breakthrough in using photons for computers will increase the productivity of those working with computers a hundredfold.You would expect this breakthrough to shift the

Accepted Answer

A technological breakthrough that increases productivity will cause the marginal product of labor to increase, which will shift the marginal product of labor curve up and to the right. As a result, firms will demand more labor at any given wage rate, which will increase the quantity of labor demanded.

Question 10

Suppose the marginal product of labor is
MPN = 200 - 0.5N
Where N is aggregate employment.The aggregate quantity of labor supplied is 300 + 8w,where w is the real wage.What is the equilibrium real wage?

Accepted Answer

In equilibrium, the real wage should equal the marginal product of labor. Thus, we need to solve for the real wage such that:

200 - 0.5N = 300 + 8w

Simplifying the equation by substituting 300 + 8w for N:

200 - 0.5(300 + 8w) = 300 + 8w

100 - 4w = 0.5(300 + 8w)

100 - 4w = 150 + 4w

8w = 50

w = 6.25

Therefore, the equilibrium real wage is approximately $6.25, which corresponds to answer choice B.

Question 11

Suppose a firm's hourly marginal product of labor is given by MPN = A (200 -
N).(a) If A = 0.2 and the real wage rate is $10 per hour,how much labor will the firm want to hire? (b)	Suppose the real wage rate rises to $20 per hour.How much labor will the firm want to hire? (c)	With the real wage rate at $10 per hour,how much labor will the firm want to hire if A rises to 0.5?

Accepted Answer

The answer of Suppose a firm's hourly marginal product of...

Question 12

1)Suppose the marginal product of labor is
MPN = 200 - 0.5N
Where N is aggregate employment.The aggregate quantity of labor supplied is 300 + 8w,where w is the real wage.What is the equilibrium real wage?

Accepted Answer

In equilibrium, the marginal product of labor equals the real wage. Set MPN = 200 - 0.5N equal to the labor supply 300 + 8w. Solving 200 - 0.5N = 300 + 8w for w gives w = 2.

Question 13

The income effect of a higher real wage on the quantity of labor supply is the

Accepted Answer

The income effect of a higher real wage on the quantity of labor supply is the tendency of workers to supply less labor in response to becoming wealthier. This is because when wages are higher, workers can afford to work fewer hours and still maintain the same level of income. As a result, the opportunity cost of leisure time decreases, making leisure time relatively more valuable compared to work, leading to a reduction in labor supply.

Question 14

Suppose the marginal product of labor is
MPN = 200 - 0.5N
Where N is aggregate employment.The aggregate quantity of labor supplied is 300 + 8w,where w is the real wage.What is the equilibrium quantity of employment?

Accepted Answer

In equilibrium, the marginal product of labor (MPN) equals the real wage (w). Setting MPN equal to the wage and solving for N gives us the equilibrium quantity of employment. MPN = 200 - 0.5N = w. The supply of labor is 300 + 8w. Setting these equal to each other and solving for N gives us the equilibrium quantity of employment, which is 380.

Question 15

How would each of the following events affect Cheryl Shirker's supply of labor?
(a)Cheryl's firm announces a reorganization plan,in which she will get a big promotion and raise in six months.
(b)Cheryl's speculative investment in plutonium futures pays off big,netting her a profit of $300 thousand.
(c)Cheryl's father,who had planned to leave her a large bequest,must spend all his wealth on medical bills after a prolonged illness.

Accepted Answer

The answer of How would each of the following events...

Question 16

If Jeff's wage rate rises,he decides to work more hours.From this,we can infer that

Accepted Answer

According to the substitution effect, as the wage rate rises, the opportunity cost of leisure increases. Therefore, workers tend to substitute leisure time for working more hours to receive higher income. In contrast, the income effect states that an increase in wage rate leads to an increase in income, resulting in an increase in leisure time. However, in this scenario, Jeff has chosen to work more hours, indicating that the substitution effect is greater than the income effect, and Jeff values the additional income more than the leisure time. Therefore, option A is the correct answer.

Question 17

In each of the following scenarios,state whether the labor supply curve would shift to the left,to the right,not shift at all,or if the shift is ambiguous because there is more than one effect and they would move the curve in opposite directions.
(a)The stock market rises sharply.
(b)Fewer teenagers work while in school than before.
(c)A large fraction of the population flees the country because of a bird flu epidemic.
(d)The expected future wage declines and the stock market crashes.
(e)The current real wage rate rises.

Accepted Answer

The answer of In each of the following scenarios,state whether...

Question 18

Over the past 100 years,what has happened to the average workweek in the U.S.manufacturing industry? Why has this occurred? What are the implications for the size of the income and substitution effects?

Accepted Answer

The answer of Over the past 100 years,what has happened...

Question 19

If Jeff's wage rate rises,he decides to work fewer hours.From this,we can infer that

Accepted Answer

When Jeff decides to work fewer hours as his wage rate rises, it indicates that the income effect (the increase in his purchasing power, leading him to enjoy more leisure time) outweighs the substitution effect (the incentive to work more hours because the opportunity cost of not working has increased).

Question 20

Which of the following events would lead to an increase in the marginal product of labor for every quantity of labor?

Accepted Answer

A favorable supply shock such as a fall in the price of oil would lead to an increase in the marginal product of labor for every quantity of labor. This is because a fall in input prices will increase the productivity of labor, since firms will be able to produce more output with the same amount of labor input. Additionally, this increase in productivity will also lead to an increase in real wages, since firms will be willing to pay higher wages to their workers due to their increased productivity.

Quiz 3: Productivity, Output, and Employment

The aggregate supply of labor is the

A permanent increase in the real wage rate has a income effect on labor supply than a temporary increase in the real wage,so labor supply is with a permanent wage increase than for a temporary wage increase.