ECO Chapter 13

23. A monopsonist is currently paying its 1,000 workers $5.00 per hour. However, its marginal wage cost is $6.00 per hour. If the government sets a minimum wage of $5.50, then: a. employment at this firm will rise b. employment at this firm will fall c. employment at this firm will be unaffected d. employment at this firm will rise but the firm's total wage bill will fall

a

26. Suppose this labor market is monopsonistic, so that the wage is W1 and employment is Q1. If W* is imposed as the minimum wage, then employment in this market: a. will rise to Q2 c. will fall b. will rise to Q4 d. will remain the same

a

29. Which one of the following claims concerning the minimum wage is generally supported by empirical evidence? a. The minimum wage has only a minor impact on the overall degree of income inequality b. The minimum wage has increased teenage employment as a result of the shock effect c. Union members suffer the greatest negative impacts of the minimum wage d. The reduction in teen employment due to the minimum wage is less than the increase in unemployment

a

18. The federally mandated minimum wage: a. is adjusted each year by an act of Congress to account for inflation b. typically falls in value owing to inflation until periodically adjusted by Congress c. is adjusted automatically whenever its inflation-adjusted value falls below its original value established in 1938 d. is substantially below its original 1938 value in real terms because of the effect of inflation 3

b

19. A majority of the workers earning the minimum wage: a. are males c. work full-time b. are females d. are teenagers Questions 20 - 22 refer to the diagram below, which shows a competitive low-wage labor market:

b

20. Consider the diagram. Suppose the government establishes a minimum wage of $7.00 in this market. Employment would decline by _____ workers and unemployment would increase by _____ workers. a. 20, 20 b. 20, 35 c. 35, 20 d. 35, 35

b

21. Consider the diagram. Suppose the government establishes a minimum wage of $7.00 in this market. Which of the following is a true statement? a. Demand is elastic over the relevant range, so that total wage income rises b. Demand is elastic over the relevant range, so that total wage income falls c. Demand is inelastic over the relevant range, so that total wage income rises d. Demand is inelastic over the relevant range, so that total wage income falls

b

22. Consider the diagram. Suppose the government establishes a minimum wage of $7.00 in this market. If all displaced workers subsequently contribute an amount equal to their next most productive employment, the net loss of domestic output is: a. $17.50 b. $40 c. $50 d. $75

b

Questions 25 - 27 refer to the following diagram. 25. Suppose this labor market is competitive, so that the wage rate is W2 and employment is Q3. If W* is imposed as the minimum wage, then employment in this market: a. will rise b. will fall c. will remain the same d. may or may not change; more information is required

b

27. Suppose this firm is a perfectly discriminating monopsonist. If W* is imposed as the minimum wage, then: a. employment will rise from Q1 to Q2 b. employment will fall from Q3 to Q1 c. employment will fall from Q3 to Q2 d. employment will be unaffected

c

28. Examining evidence on the impacts of increases in state minimum wages in New Jersey and California, Card and Krueger found: a. substantial reductions in employment, particularly among teens b. no increases in wages of low-wage workers, because employers flouted the law c. no evidence of reductions in employment d. poor quality of the data collected by Neumark and Wascher

c

24. Increases in the minimum wage tend to: a. increase both formal schooling and general on-the-job training b. increase formal schooling and reduce general on-the-job training c. reduce formal schooling and increase general on-the-job training d. reduce both formal schooling and general on-the-job training DL = VMP SL Labor Wage 50 70 85 $6.00 $7.00 $3.00 4

d