ECON 202 Chapter 11

Assume that both the goods and the labor market are perfectly competitive. If at​ equilibrium, the marginal cost faced by a firm is​ $3 and the market wage rate is​ $6, the marginal product of the last unit of labor hired by the firm must​ be: A. 2 units. B. 18 units. C. 0.5 unit. D. 9 units.

A. 2 units.

Why is the supply curve of labor usually upward​ sloping? A. As the wage decreases​, the opportunity cost of leisure decreases​, causing individuals to devote less time to working. B. As the wage decreases, purchasing power decreases​, causing individuals to devote less time to working because leisure is a normal good. C. As the wage​ increases, the opportunity cost of labor​ increases, causing individuals to devote more time to working. D. As the wage​ increases, purchasing power​ increases, causing individuals to devote less time to working because leisure is a normal good. E. As the wage increases​, purchasing power increase​, causing individuals to devote more time to working because leisure is an inferior good.

A. As the wage decreases​, the opportunity cost of leisure decreases​, causing individuals to devote less time to working.

Which of the following statements is true? A. Lower wages are normally offered for jobs with better amenities. B. Educational qualifications and wage rates are negatively correlated. C. Jobs that are relatively risky pay a lower wage than other, safer jobs. D. Incentives are normally higher for desirable occupations than for undesirable occupations.

A. Lower wages are normally offered for jobs with better amenities.

The most important factor contributing to wage differences in the labor market is differences in the level of education and training among workers. A. True B. False

A. True

In the case of​ leisure, the substitution effect implies​ that: A. when the price of leisure​ increases, people will work more. B. if people tend to work more and relax​ less, the price of leisure decreases. C. if people tend to work more and relax​ less, the price of leisure increases. D. when the price of leisure​ increases, people will work less and relax more.

A. when the price of leisure​ increases, people will work more.

When 4 units of labor are employed, total product is 6 units; when 5 units of labor are employed, total product is 8 units of output. If the price of output is $5 per unit, what is the marginal revenue product of the 5th unit of labor? A. $40 B. $10 C. $2 D. $5

B. $10

Which of the following correctly identifies a difference between taste-based discrimination and statistical discrimination? A. Taste-based discrimination is observed in the manufacturing sector, whereas statistical discrimination is observed in the service sector. B. Employers engaging in taste-based discrimination are willing to forego profits, whereas employers engaging in statistical discrimination are trying to enhance profits. C. Employers engaging in statistical discrimination are willing to forego profit, whereas employers engaging in taste-based discrimination are trying to enhance profits. D. Taste-based discrimination is observed in the service sector, whereas statistical discrimination is observed in the manufacturing sector.

B. Employers engaging in taste-based discrimination are willing to forego profits, whereas employers engaging in statistical discrimination are trying to enhance profits.

The marginal revenue product of labor is likely to be greater for the employees of A. Parlor Coffee because the founder supports a higher minimum​ wage, which indicates that there is less competition. B. Parlor Coffee because the founder supports a higher minimum​ wage, which indicates that the product price is higher. C. Creative Cakes because the owner opposes a higher minimum​ wage, which indicates that there is more competition. D. Creative Cakes because the owner opposes a higher minimum​ wage, which indicates that the product price is higher.

B. Parlor Coffee because the founder supports a higher minimum​ wage, which indicates that the product price is higher.

Consider the market for opticians. What is likely to happen to the equilibrium wage and quantity of opticians if more and more people turn to laser eye surgery instead of wearing glasses or contact lens? A. The equilibrium wage falls and the equilibrium quantity of opticians rises. B. The equilibrium wage and the equilibrium quantity of opticians fall. C. The equilibrium wage rises and the equilibrium quantity of opticians falls. D. The equilibrium wage and the equilibrium quantity of opticians rise.

B. The equilibrium wage and the equilibrium quantity of opticians fall.

What is the difference between the marginal product of labor and the marginal revenue product of labor for a firm in a perfectly competitive​ market? A. The marginal revenue product of labor is equal to the additional marginal product of labor as a result of hiring one more worker. B. The marginal product of labor is equal to the marginal revenue product of labor multiplied by the product price. C. The marginal revenue product of labor is equal to the marginal product of labor multiplied by the amount produced. D. The marginal product of labor is equal to the marginal revenue product of labor divided by the amount produced. E. The marginal revenue product of labor is equal to the marginal product of labor multiplied by the product price.

B. The marginal product of labor is equal to the marginal revenue product of labor multiplied by the product price.

Over​ time, the gap between the wages of workers with a college degree and the wages of workers without a college degree has been increasing. ​ Shouldn't this gap have increased the incentive for workers to earn a college​ degree, thereby increasing the supply of​ college-educated workers and reducing the size of the​ gap? This wage gap may have not been reduced because A. the demand for​ college-educated workers has increased more slowly than the supply of​ college-educated workers. B. a college education is only a signal of desirable worker characteristics and does not change wages. C. the demand for workers without a college degree has been increasing due to globalization. D. the supply for workers without a college degree has been decreasing due to immigration. E. both a and b.

B. a college education is only a signal of desirable worker characteristics and does not change wages.

An increase in technology that enhances labor productivity will likely result in: A. a decrease in labor employment and an increase in the wage rate. B. an increase in labor employment and an increase in the wage rate. C. an increase in labor employment and a decrease in the wage rate. D. employers using less labor and more capital while the wage effect is unknown. E. a decrease in labor employment and a decrease in the wage rate.

B. an increase in labor employment and an increase in the wage rate.

The economic penalty is not enough to eliminate discrimination because of the presence of all of the following except​: A. negative feedback loops. B. compensating differentials. C. worker discrimination. D. customer discrimination.

B. compensating differentials.

An increase in the supply of musicians ________ the number of musicians employed, and ________ the wages paid to musicians. A. increases; increases B. increases; decreases C. decreases; increases D. decreases; decreases

B. increases; decreases

When expectations cause people to discriminate against a certain group, it is referred to as: A. preferential bias. B. statistical discrimination. C. taste-based discrimination. D. implicit discrimination.

B. statistical discrimination.

If a pet grooming salon hires an additional groomer, that worker can groom 4 additional pets per day. The average grooming fee is $25. The most the salon would be willing to pay that groomer is A. $4 per day. B. $25 per day. C. $100 per day. D. indeterminate with the given information.

C. $100 per day.

Which of the following is likely to lead to a left shift in the demand curve for labor in the petroleum extraction​ industry? A. A decrease in the wage rate B. An increase in the wage rate C. An increase in the price of cars D. An increase in the price of petroleum

C. An increase in the price of cars

In what sense do employers who discriminate pay an economic​ penalty? A. The government brings legal action against the employers for breach of affirmative action policies. B. The employers face lower​ costs, lower profit and bigger portion of the market share. C. The employers face higher​ costs, lower profit and eventual elimination from the market. D. The employers can not hire better workers due to their bad reputation.

C. The employers face higher​ costs, lower profit and eventual elimination from the market.

Which of the following is likely to lead to a left shift in the supply curve for labor to a firm? A. An increase in the opportunity cost of leisure B. The introduction of labor-saving technology C. The establishment of a new firm nearby that offers higher wages D. The introduction of labor-complementary technology

C. The establishment of a new firm nearby that offers higher wages

Other things remaining the same, which of the following is likely to happen if all homemakers in an economy start working as paid labor? A. There will be an increase in both the wage rate and the employment level. B. There will be a fall in both the wage rate and the employment level. C. There will be a fall in the wage rate in the country and an increase in the employment level. D. There will be an increase in the wage rate in the country and a fall in the employment level.

C. There will be a fall in the wage rate in the country and an increase in the employment level.

Which of the factors listed below does not cause the demand curve for labor to​ shift? A. a change in technology B. a change in the price of the product C. a change in the wage D. a change in human capital

C. a change in the wage

When a firm hires a worker for one hour, the marginal benefit to that firm equals the: A. price of each item that the worker produces in that hour. B. number of items the worker produces in that hour. C. dollar value of the goods produced by that worker in one hour. D. hourly wage of that worker.

C. dollar value of the goods produced by that worker in one hour.

A woman who owned a music store in New York City was quoted in an article in the Wall Street Journal as​ "bemoaning the comparative salaries of tubists and stockbrokers.​ 'People should be paid in terms of what they contribute to​ people's well​ being.'" ​Source: Corinne​ Ramey, "NYC's Last Classical Sheet Music Store to​ Close," Wall Street Journal​, March​ 2, 2015. The pay that people receive is based on A. the wages of the people they work with. B. the number of employees in the enterprise. C. labor supply and labor demand in that market. D. the marginal contribution of the last worker.

C. labor supply and labor demand in that market.

An increase in the price of televisions will A. shift the labor demand curve to the left. B. shift the labor demand curve to the right. C. result in a downward movement along the labor demand curve. D. result in an upward movement along the labor demand curve.

C. result in a downward movement along the labor demand curve.

When expectations cause people to discriminate against a certain group, it is referred to as ________. A. preferential bias B. taste-based discrimination C. statistical discrimination D. cultural discrimination

C. statistical discrimination

If the equilibrium wage is below the actual wage: A. the wage rate will rise. B. the demand for labor will increase. C. the wage rate will fall. D. the demand for labor will decrease.

C. the wage rate will fall.

Chinese high schools introducing new vocational courses in assembling electronic products will A. shift the labor demand curve to the left. B. result in an upward movement along the labor demand curve. C. result in a downward movement along the labor demand curve. D. shift the labor demand curve to the right.

D. shift the labor demand curve to the right.

Devra​ Gartenstein, a restaurant​ owner, made the following observation about preparing​ food: "Cooks become increasingly less productive as a kitchen becomes increasingly​ crowded." ​Source: Devra​ Gartenstein, "Law of Diminishing Marginal Returns in Restaurant​ Operations," smallbusiness.chron.com. What do economists call the problem she is​ describing? What are its implications for the marginal product of labor for​ cooks? A. Fixed​ inputs, where additional cooks do not produce additional output. B. Negative marginal​ returns, where additional cooks reduce the output produced. C. Increasing marginal​ returns, where additional cooks produce additional output. D. Diminishing marginal​ returns, where additional cooks produce less additional output. Do restaurant owners have a solution to this problem in the long​ run? Briefly explain. A. No, restaurant owners cannot solve this problem. B. Yes, restaurant owners can vary the​ size, or​ number, of kitchens. C. ​Yes, it is possible to solve this problem with economies of scale. D. Yes, restaurant owners can solve this problem by adding more cooks.

D. Diminishing marginal​ returns, where additional cooks produce less additional output. A. No, restaurant owners cannot solve this problem.

Let MP = marginal product, P = output price, and W = wage, then the equation that represents the condition where a competitive firm would hire another worker is A. P × MP < W. B. P × W > MP. C. P × MP = W. D. P × MP > W.

D. P × MP > W.

If the supply of labor decreases, which of the following events will occur? A. The wage rate will fall and firms will increase employment up until the point where MRP equals the new wage rate. B. The wage rate will increase and firms will increase employment up until the point where MRP equals the new wage rate. C. The wage rate will fall and firms will decrease employment to the point where MRP equals the new wage rate. D. The wage rate will increase and firms will decrease employment to the point where MRP equals the new wage rate.

D. The wage rate will increase and firms will decrease employment to the point where MRP equals the new wage rate.

If the demand for labor is unchanged, an increase in the supply of labor will lead to A. a decrease in the quantity of labor demanded and an increase in the equilibrium wage. B. a decrease in the quantity of labor demanded and a decrease in the equilibrium wage. C. an increase in the quantity of labor demanded and an increase in the equilibrium wage. D. an increase in the quantity of labor demanded and a decrease in the equilibrium wage.

D. an increase in the quantity of labor demanded and a decrease in the equilibrium wage.

In the figure above, the substitution effect outweighs the income effect in all segments EXCEPT A. bc. B. 0a. C. 0c. D. cd

D. cd

The dollar value of the marginal product of labor is the: A. amount of output produced by the first unit of labor hired by a firm. B. extra output that is produced by hiring an additional unit of labor. C. value of the output produced by all the workers in a firm. D. contribution of an additional unit of labor to a firm's revenue.

D. contribution of an additional unit of labor to a firm's revenue.

Many economists have attempted to measure the effects of economic discrimination on wages. What have they​ concluded? One of their conclusions is that A. none of the differences in wages are due to discrimination. B. all of the differences in wages are due to education. C. economic discrimination accounts for most of the differences in wages. D. most of the differences in wages are due to factors other than discrimination. E. none of the differences in wages are due to experience.

D. most of the differences in wages are due to factors other than discrimination.

Alejandro is a computer programmer employed by XYZ Tech Corp. He is Hispanic. He gets an offer from another company that is trying to lure him away from XYZ and is willing to pay him a higher salary than XYZ pays him. Alejandro asks his boss whether the company is willing to match the offer to keep him at XYZ. His boss says, "Don't let the door hit you on your way out." Why did the boss fail to match the other firm's offer? A. statistical discrimination B. compensating differential C. taste-based discrimination D. not clear why XYZ did not match the other firm's offer

D. not clear why XYZ did not match the other firm's offer

If an industry introduces a labor-saving technology in production, the demand curve for labor in that industry is likely to: A. become horizontal. B. shift to the right. C. become vertical. D. shift to the left.

D. shift to the left.

If wages​ increase, will a worker supply more​ labor? A. Yes because the substitution and income effects both cause workers to supply a larger quantity of labor. B. Only if the effect of the increase in purchasing power is larger than that of the opportunity cost of leisure C. No because purchasing power has increased and leisure is a normal good purchasing power has increased and leisure is a normal good. D. Yes because the opportunity cost of leisure is higher E. Only if the effect of the opportunity cost of leisure increasing is larger than that of the increase in purchasing power

E. Only if the effect of the opportunity cost of leisure increasing is larger than that of the increase in purchasing power

Sanitary engineers may earn higher wages than receptionists A. due to differences in productivity. B. due to compensating differentials because the work of sanitary engineers is dirty and unpleasant. C. due to discrimination. D. both a and b. E. all of the above.

E. all of the above.