Question 1

A leftward shift in the labour supply curve might result from:

Accepted Answer

When people start valuing leisure more highly, they tend to work less or reduce the number of hours spent on work-related activities. This reduces the supply of labour, resulting in a leftward shift of the labour supply curve. The other choices are less likely to cause a leftward shift in the labour supply curve. B, D and C may cause shifts in the labour supply curve but in different directions.

Question 2

In terms of labour supply,the income effect of a higher wage causes a(n):

Accepted Answer

The income effect of a higher wage means that individuals can maintain the same standard of living while working fewer hours, leading to a decrease in the quantity of labour supplied as they opt for more leisure time.

Question 3

The _____ effect of a _____ wage causes individuals to substitute _____.

Accepted Answer

The substitution effect of a higher wage causes individuals to substitute labour for leisure because the opportunity cost of leisure increases, making work more attractive.

Question 4

An input differs from a factor of production in that the former gets used up in production,while the latter is an enduring source of income for its owner.

Accepted Answer

Inputs such as raw materials, labor, and energy are used up or consumed during the production process, whereas factors of production, namely land, labor, capital, and entrepreneurship, are not used up and can continue to generate income over time.

Question 5

A wage _____ reduces the quantity of labour supplied through the _____ effect.

Accepted Answer

An increase in wages can lead to a reduction in the quantity of labor supplied due to the income effect, where workers may choose to work less because they can maintain their desired income level with fewer hours.

Question 6

The importance of human capital has been increased by technological progress.

Accepted Answer

Technological progress has led to an increase in demand for highly skilled workers, making human capital more important in today's economy.

Question 7

A backward-bending supply curve of labour shows that at relatively high wages,the _____ effect dominates the _____ effect,and the supply curve has a _____ slope.

Accepted Answer

The backward-bending supply curve for labour shows that as wages increase, the substitution effect dominates and individuals are willing to work more as the opportunity cost of leisure time increases. However, at some point, the income effect takes over and workers are willing to work less as their income increases. This creates a negative slope in the supply curve, indicating that as wages continue to rise, the quantity of labour supplied decreases. The income effect dominates at relatively high wages, meaning that even though the opportunity cost of leisure time has increased, workers are still willing to reduce their work hours because their higher income provides them with greater purchasing power and the ability to enjoy more leisure time.

Question 8

A backward-bending supply curve of labour shows that at relatively low wages,the _____ effect dominates the _____ effect,and the supply curve has a _____ slope.

Accepted Answer

At relatively low wages, the substitution effect dominates the income effect, leading to a positive slope in the supply curve of labor.

Question 9

Beyond some point,a higher wage may induce an individual to work _____,and the labour supply curve may then _____.

Accepted Answer

A higher wage may induce an individual to work less due to the fact that now they can afford to work fewer hours and maintain the same standard of living. This creates a situation where the labour supply curve bends backward, which means that the supply of labour decreases as the wage rate increases.

Question 10

The trade-off between work and leisure underlying the supply of labour involves the income effect and the _____ effect.

Accepted Answer

The income effect is the increase in leisure time that occurs when the wage rate increases, which allows individuals to afford more leisure activities. The substitution effect is the decrease in leisure time that occurs when the wage rate increases because individuals substitute leisure time for work time in order to earn more income. Therefore, the correct answer is A.

Question 11

A leftward shift in the labour supply curve will result if:

Accepted Answer

A leftward shift in the labour supply curve would occur if people began to value leisure more highly, as they would be less willing to work for a given wage. The other options may cause shifts in the demand for labour, but not in the supply.

Question 12

In terms of labour supply,the substitution effect of a higher wage causes a(n):

Accepted Answer

The substitution effect of a higher wage means that the wage rate for work is relatively more attractive compared to leisure. This encourages workers to supply more labour and work more hours, leading to an increase in the quantity of labour supplied. Option A is incorrect because the substitution effect of a higher wage makes work relatively more attractive than leisure, reducing the amount of leisure time taken. Option C is not correct because the substitution effect encourages workers to substitute leisure for work, not the other way around. Option D is unrealistic since no one would reduce their work time to zero just because their wage increased.

Question 13

Which factor will NOT shift the labour supply curve?

Accepted Answer

A change in the wage rate results in a movement along the labor supply curve, not a shift of the curve itself.

Question 14

The trade-off between work and leisure underlying the supply of labour involves the substitution effect and the _____ effect.

Accepted Answer

The other options do not fit the context of the relationship between work and leisure. The income effect refers to changes in the supply of labour when income changes. The substitution effect is the change in the supply of labour when the wage rate changes.

Question 15

Capital,the factor of production,includes physical capital (such as buildings and machines),human capital (improvement in labour by education and knowledge),and financial capital (such as stock market investments).

Accepted Answer

Financial capital is not considered a factor of production; only physical and human capital are. Factors of production refer to resources used in the production process, while financial capital is used to acquire these resources.

Question 16

Consider the labour market for accountants.As more people earn accounting degrees,we should expect to see a(n):

Accepted Answer

As more people earn accounting degrees, the labour supply of accountants will increase, shifting the labour supply curve to the right. This will result in a surplus of accountants, leading to a decrease in wages and a potential increase in unemployment among accountants.

Question 17

In terms of labour supply,the substitution effect of a higher wage causes a(n):

Accepted Answer

The substitution effect of a higher wage makes work more attractive compared to leisure, leading individuals to substitute work for leisure, thus increasing the quantity of labor supplied.

Question 18

Approximately 71% of income generated in Canada goes to corporate profit.

Accepted Answer

This statement is false. According to Statistics Canada, in 2020, corporate profits made up approximately 8.4% of Canada's Gross Domestic Product (GDP). Therefore, approximately 92.6% of income generated in Canada goes to wages, salaries, and benefits for employees, as well as taxes and other forms of government revenue.

Question 19

An increase in wealth will cause the labour supply curve to:

Accepted Answer

An increase in wealth increases the demand for leisure if leisure is a normal good, causing the labor supply curve to shift leftward as people choose to work less.

Question 20

Which factor will NOT shift the labour supply curve?

Accepted Answer

A change in the wage rate results in movement along the labour supply curve, not a shift of the curve itself.

Quiz 19: Factor Markets and the Distribution of Income

A leftward shift in the labour supply curve might result from:

In terms of labour supply,the income effect of a higher wage causes a(n) :

The ___ effect of a _ wage causes individuals to substitute ___.

An input differs from a factor of production in that the former gets used up in production,while the latter is an enduring source of income for its owner.

A wage _ reduces the quantity of labour supplied through the _ effect.

The importance of human capital has been increased by technological progress.

A backward-bending supply curve of labour shows that at relatively high wages,the ___ effect dominates the _ effect,and the supply curve has a ___ slope.

A backward-bending supply curve of labour shows that at relatively low wages,the ___ effect dominates the _ effect,and the supply curve has a ___ slope.

Beyond some point,a higher wage may induce an individual to work _,and the labour supply curve may then _.

The trade-off between work and leisure underlying the supply of labour involves the income effect and the _____ effect.

A leftward shift in the labour supply curve will result if:

In terms of labour supply,the substitution effect of a higher wage causes a(n) :

Which factor will NOT shift the labour supply curve?

The trade-off between work and leisure underlying the supply of labour involves the substitution effect and the _____ effect.

Capital,the factor of production,includes physical capital (such as buildings and machines),human capital (improvement in labour by education and knowledge),and financial capital (such as stock market investments).

Consider the labour market for accountants.As more people earn accounting degrees,we should expect to see a(n) :

In terms of labour supply,the substitution effect of a higher wage causes a(n) :

Approximately 71% of income generated in Canada goes to corporate profit.

An increase in wealth will cause the labour supply curve to:

Which factor will NOT shift the labour supply curve?