Chapter 17
Hotspur Incorporated, a manufacturer of microwave ovens, is a price taker in its input and output markets. The firm hires labor at a constant wage rate of $800 per week and sells microwave ovens at a constant price of $80. The table shows the relationship between the quantity of labor it hires and the quantity of microwave ovens it produces. Assume that labor is the only variable input. What is the amount of revenue added as a result of hiring the fourth worker?
$1,200
Which of the following is an example of a monopsony An example of a monopsony is
. a pineapple plantation on a small island in Hawaii a pineapple plantation on a small island in Hawaii that is the only employer of labor in that location.
Economists have estimated that being in a union increases a worker's wages about percent, holding constant other factors.
10
In 2017, fullminus−time workers aged 25 and over with a college degree earned ________ school dropouts.
2.5 times as much as high
Suppose land (in acres) at a busy intersection is a natural resource. The market for land at this intersection is illustrated in the figure to the right. What is the economic rent economic rent from this land? Economic rentEconomic rent is per acre
2.75 million per acre
Refer to the diagram to the right which shows the marginal revenue product for Dale's Handminus−Sewn Doilies, a producer of linen doilies. If the wage rate is $40, how many workers should Dale hire?
3
Suppose the wage increasesincreases. What effect will this have on a worker's labor supply? The substitution effect of a wage increaseincrease causes the worker to supply ▼ quantity of labor.
A LARGER
Which of the following correctly explains the effect of a variable on the labor demand curve?
If human capital increases human capital increases, then the labor demand curve will shift to the right.
Which of the following correctly explains the effect of a variable on the labor demand curve?
If the quantities of other inputs increase the quantities of other inputs increase, then the labor demand curve will shift to the right.
White males earn on average over $10,000 more annually than Hispanic malesHispanic males. Is this due to economic discrimination? The wage gap between white males and Hispanic males
Is partly due to economic discrimination and partly due to differences in experience.
White males earn on average over $10,000 more annually than Hispanic malesHispanic males. Is this due to economic discrimination? The wage gap between white males and Hispanic males
Is partly due to economic discrimination and partly due to differing preferences for jobs differing preferences for jobs.
Which of the following is a reason why some firms do not use commission pay?
It is difficult to measure the output and attribute output to a particular worker.
What effect does experience have on the wage gap between men and women? Comparing men and women of the same age, many women
Leave the workforce after having a child, so men have more work experience, which raises productivity and increases the male-female wage gap.
The marginal revenue product of labor is defined as
The change in the firm's revenue as a result of hiring one more worker.
The term "derived demand" refers to
The demand for a factor of production that is derived from the demand for the good the factor produces.
In academia, professors in some disciplines receive higher salaries than others. For example, professors teaching in business schools receive higher salaries than professors in the English department. Suppose at Unity College, assistant professors in the business school earn $80,000 while assistant professors in the English department earn $50,000. Now suppose the government passes comparable worth legislation that requires academic institutions to pay all faculty the same salaries. Refer to the scenario above. Following the passage of comparable worth legislation, Unity College responds by placing salaries at $65,000. Which of the following is the result of the legislation?
There will be a surplus in the market for English professors and a shortage in the market for business professors.
Do union workers earn higher or lower wages than nonunion workers? Explain briefly.
Union members earn more than nonunion members at least partially because union members work in industries where wages are relatively high regardless of unions.
If the substitution effect is bigger than the income effect, then the supply curve will slop
Upward
If the demand for labor is unchanged, an increase in the supply of labor will lead to
an increase in the quantity of labor demanded and a decrease in the equilibrium wage.
Which of the following explains why talented major league baseball players command much higher salaries than neurosurgeons?
because the supply of talented major league baseball players is low relative to its demand compared to the supply of neurosurgeons. Therefore, adding another player yields far greater marginal benefit than adding another neurosurgeon.
Suppose you have worked at a local sandwich shop for six months and now you plan to ask your manager for a raise. How can you convince your manager that you are worth more money than you are currently being paid?
by showing your manager that your marginal revenue product has increased since your last wage increase
Suppose a firm may choose between paying workers based on straight-time pay or by commission. Why might a firm choose to compensate its workers by commission? A firm might choose to pay its workers commissions instead of straight-time pay because
commissions help to retain the most productive employees help to retain the most productive employees
Compared to perfectly competitive input markets, a monopsony, such as the pineapple plantation in Hawaii the pineapple plantation in Hawaii,
creates deadweight loss by hiring fewer workers.
Compared to perfectly competitive input markets, a monopsony, such as the pineapple plantation in Hawaiithe pineapple plantation in Hawaii,
creates deadweight loss by hiring fewer workers.
Suppose Sony makes PlayStation 3 using capitalcapital. In what way is capitalcapital a derived demand? CapitalCapital for Sony to make PlayStation 3 is a derived demand because
it depends on consumer demand for PlayStation 3.
Suppose Sony makes PlayStation 3 using labor. In what way is labor a derived demand? Labor for Sony to make PlayStation 3 is a derived demand because
it depends on consumer demand for PlayStation 3.
What effect does experience have on the wage gap between men and women? Comparing men and women of the same age, many women
leave the workforce after having a child, so men have more work experience, which raises productivity and increases the male-female wage gap.
Comparable worth legislation
mandates that employers pay the same wages to workers, regardless of their gender, for jobs that have comparable worth.
Painters who paint water towers earn higher wages relative to painters who paint houses because
painting water towers is more risky than painting houses.
Economic discrimination takes place when an employer
pays workers different wages on the basis of some arbitrary characteristics of workers that are irrelevant to the job performed.
In general, the labor supply curve
slopes upward because as the wage rises, the opportunity cost of leisure increases.
The income effect of a wage increaseincrease causes the worker to supply a quantity of labor.
smaller
The equilibrium wage and quantity of labor in the market for skilled workers is determined by
the demand and supply of labor.
Labor economists have recently begun focusing on a new area referred to as personnel economics. Describe what personnel economics might study. Personnel economics examines all of the following issues except
the determinants of changes in average wages over time.
Labor economists have recently begun focusing on a new area referred to as personnel economics. Describe what personnel economics might study. Personnel economics examines all of the following issues except
the effects of labor unions on wages the effects of labor unions on wages.
A firm's primary interest, when it hires an additional worker is
the extra revenue the firm realizes from hiring that worker.
Why are major league baseball players on average paid substantially more than college professors? Explain. Major league baseball players are paid more than college professors because
the marginal revenue product of major league baseball players is high relative to college professors.
An individual's labor supply curve shows
the relationship between wages and the quantity of labor that she is willing to supply.
If the workers in the dangerous factory, absent the safety law, experience cognitive dissonance, then they the true risk of their job.
underestimate
Men are overrepresented in some jobs (and women are overrepresented in other jobs). Explain these differences. One explanation is
women may be more likely to select jobs that allow them to be home with children in the after noon.
Suppose workers have the option of working in a dangerous factory or a safe factory. Both jobs require the same productive characteristics, such as education and training. According to compensating differentialsLOADING..., would a law mandating an improvement in safety for the dangerous factory make workers in that factory better off? Given compensating differentials, the safety law
would not necessarily make workers in the dangerous factory better off because it would lower their wages.
In situations where new technologies are considered substitutes for workers, demand for these workers will ________, resulting in ________ in the equilibrium wage.
decrease; a decrease
