Ch. 15

(Refer to the labor market diagrams) The tactics of inclusive unionism are shown in Figure(s):

4 & 5: -4: Wage rate line is above equilibrium -5: Wage rate line is above equilibrium but goes through where MRC=D

The labor supply curve facing a purely competitive employer is __________, whereas the labor supply curve facing a monopsonist is ___________. A. upsloping; horizontal B. downsloping; vertical C. vertical; upsloping D. horizontal; upsloping

Horizontal; upsloping

The principal-agent problem arises

when the interests of owners and workers diverge.

Hiring more supervisory personnel

can reduce the principal-agent problem but increase costs.

The electricians' union is a good example of:

exclusive unionism (aka craft union)

(Refer to the labor market diagrams) The tactics of exclusive unionism are portrayed in Figure:

1: Supply curve shifts to the left

(Refer to the labor market diagrams) The economic impact of occupational licensing can best be demonstrated through Figure:

1: Supply curve shifts to the left

Exclusive unionism

By excluding workers from unions & therefore from the labor supply, craft unions succeed in elevating wage rates.

Bilateral monopoly:

Combination of the monopsony model & the inclusive unionism model. A single seller and a single buyer.

Increases in the productivity of labor result partly from: A. The law of diminishing returns. B. Improvements in technology. C. Reductions in wage rates. D. Increases in the quantity of labor.

Improvements in technology.

The real wage will rise if the nominal wage: A. Falls more rapidly than the general price level. B. Increases at the same rate as labor productivity. C. Increases more rapidly than the general price level. D. Falls at the same rate as the general price level.

Increases more rapidly than the general price level.

Hospital administrators sometimes complain about a "shortage" of nurses. The shortage is the result of

Low wages that occur in the monopsonized market and could be eliminated if nurses earn wages closer to their MRP.

Which of the following is most likely to be an example of monopsony? A. The market for fast-food workers in a large summer resort town. B. The market for card dealers in Las Vegas. C. The market for Major League Baseball umpires. D. The market for retail sales clerks in a major city.

The market for Major League Baseball umpires.

Labor unions may attempt to raise wage rates by: A. increasing the supply of labor. B. forcing employers, under the threat of a strike, to pay above-equilibrium wage rates. C. decreasing the demand for labor. D. increasing the price of complementary resources.

forcing employers, under the threat of a strike, to pay above-equilibrium wage rates.

Investment in human capital is any action that

improves a worker's skills and abilities

Construction workers frequently sponsor political lobbying in support of greater public spending on highways and public buildings. One reason for this is to: A. restrict the supply of construction workers. B. increase the elasticity of demand for construction workers. C. increase the demand for construction workers. D. increase the price of substitute inputs.

increase the demand for construction workers.

The long-run rise in real-wage rates in the United States

is directly related to investments in human capital and improved labor force skills.

The single most important factor underlying the long-run increase in average real-wage rates in the United States is

labor productivity.

Other things equal, the monopsonistic employer will pay a: A. lower wage rate and hire fewer workers than will a purely competitive employer. B. higher wage rate but hire fewer workers than will a purely competitive employer. C. lower wage rate but hire a larger number of workers than will a purely competitive employer. D. higher wage rate and hire a larger number of workers than will a purely competitive employer.

lower wage rate and hire fewer workers than will a purely competitive employer.

Many economists are critical of the minimum wage because they believe that it: A. hurts the efforts of labor unions. B. reduces the number of available job opportunities. C. conflicts with policies designed to equalize the distribution of income. D. causes labor shortages in affected markets.

reduces the number of available job opportunities.

A craft union (ex: carpenters, plumbers) attempts to increase wage rates by: A. equating the MRP and the MRC curves. B. shifting the labor supply curve to the left. C. shifting the labor supply curve to the right. D. shifting the MRP curve to the right.

shifting the labor supply curve to the left.

A firm in a purely competitive labor market is a wage taker because

that firm alone cannot influence the market wage.

In monopsony: A. each firm employs a small portion of the total supply of labor. B. the workforce is highly mobile. C. the wage rate paid by the employer varies directly with the number of workers employed. D. the employer is a "wage taker."

the wage rate paid by the employer varies directly with the number of workers employed.

(Refer to the labor market diagram) D is the labor demand curve (MRP), S is the labor supply curve, & MRC is the marginal resource (labor) cost curve. If this were a monopsonistic labor market, the equilibrium wage rate and level of employment would be:

$5 and 3 respectively: Monopsonist is going to hire (quantity of labor) where MRP=MRC (D), which is a quantity of 3. They are going to pay the least they can. Follow quantity of three up until you hit the supply curve (S) and that is how much they will pay, $5.

Occupational licensing:

A group of workers in a given occupation pressure governments to pass a law that says that some occupational group (Ex: physicians, lawyers, plumbers) can practice their trade only if they meet certain requirements. *Goes along with Exclusive & Craft unionism*

The individual firm in a purely competitive labor market faces: A. a perfectly elastic labor supply curve and a downsloping labor demand curve. B. a perfectly elastic labor demand curve and an upsloping labor supply curve. C. labor demand and labor supply curves both of which are perfectly elastic. D. a downsloping labor demand curve and an upsloping labor supply curve.

A perfectly elastic labor supply curve and a downsloping labor demand curve.

Suppose that competing firms form an employers' association that hires labor as a monopsonist would. This will cause a:

Divergence of the marginal revenue cost (MRC) and the supply curve & will result in fewer workers hired at a lower wage rate.

The market supply curve for labor is upsloping because: A. Of diminishing returns. B. Employers as a group must pay higher wage rates to obtain more workers. C. Of declining MRC. D. Each employer is a "wage taker."

Employers as a group must pay higher wage rates to obtain more workers.

A profit-maximizing firm will A. Expand employment if MRP > MRC B. Reduce employment if MRP > MRC C. Expand employment if MRP = MRC D. Reduce employment if MRP = MRC

Expand employment if MRP > MRC

What is an important factor influencing labor productivity in the United States?

High capital per worker

Industrial (or Inclusive) unions:

Seek as members all available unskilled, semiskilled, and skilled workers in an industry (Ex: automobile & steel workers). An industrial union that includes virtually all available workers in its membership can put firms under great pressure to agree to its wage demands.

In a labor market characterized by bilateral monopoly, the wage rate will: A. be logically indeterminate. B. be established at the level desired by the union. C. be established at the level desired by the employer. D. always be established at the competitive level.

be logically indeterminate

The concept of human capital investment explains wage differentials because investment in human capital

enables a worker to build specialized skills that have additional wage value in the labor market.

In a monopsonistic labor market, the employer will maximize profits by employing workers up to that point at which: A. the difference between the wage rate and marginal resource (labor) cost is at a maximum. B. marginal revenue product equals marginal resource (labor) cost. C. the wage rate equals marginal revenue product. D. the wage rate equals marginal resource (labor) cost.

marginal revenue product equals marginal resource (labor) cost.

If a firm decided to pay less than the going market wage rate,

no workers would offer their services to that firm.

The general level of wages is higher in the United States and other industrially advanced countries because

of the high demand for labor in relation to supply.

A monopsonistic employer in an unorganized (nonunion) labor market will: A. pay a wage rate less than labor's MRP. B. pay the same wage rate but hire fewer workers than if the market was purely competitive C. hire the number of workers indicated by the intersection of the MRC and the labor supply curves. D. pay a wage rate in excess of labor's MRP.

pay a wage rate less than labor's MRP.

An increase in the minimum wage could

reduce employment but increase income