ch. 11 The Labor Market

What would be the shape of an individual labor supply curve, when the substitution effect dominates at low wages, but the income effect is more important at higher wages? - Vertical line - Downward-sloping curve - Backward-bending curve - Upward-sloping curve

Backward-bending curve

Which of the following is NOT a factor that shifts the labor demand curve? - Changes in the demand for your product. - Changes in the price of capital. - Changes in the supply of your product. - Better management techniques and productivity gains.

Changes in the supply of your product.

Which of the following economic conditions would result in a decrease in the demand for low skilled labor? - Better management - Cheaper machinery - Productivity gains - An increase in demand for your product

Cheaper machinery

_____ is the price of labor, so it goes on the _____ of the labor supply and labor demand curves. - Hourly wage; horizontal axis - Price of a haircut; horizontal axis - Hourly wage; vertical axis - Price of a haircut; vertical axis

Hourly wage; vertical axis

Which of the following represents a labor market in which a rising opportunity cost of work results in higher wages and fewer jobs? - The labor market for young people who enjoy playing video games. - The labor market for home health aides as baby-boomers are aging. - The labor market for private teachers when there is a pay cut for public teachers. - The labor market for stenographers when there are effective voice recognition software programs.

The labor market for young people who enjoy playing video games.

Which of the following is NOT a reason for the market supply curve to slope upwards? - The number of people who decide to work - The productivity gains of each unit of labor - The number of hours that existing workers put in - The types of occupations that people choose

The productivity gains of each unit of labor

How does a fall in the price of machinery affect the demand for low-skilled workers and does the substitution effect or the scale effect dominate in this scenario? - The scale effect dominates and leads to a decrease in the demand for low-skilled workers. - The scale effect dominates and leads to an increase in the demand for low-skilled workers. - The substitution effect dominates and leads to a decrease in the demand for low-skilled workers. - The substitution effect dominates and leads to an increase in the demand for low-skilled workers.

The substitution effect dominates and leads to a decrease in the demand for low-skilled workers.

When voice recognition software becomes more widely used, what happens to the labor market for stenographers? - Wage will decrease, and more jobs will be available. - Wage will increase, and more jobs will be available - Wage will decrease, and fewer jobs will be available. - Wage will increase, and fewer jobs will be available.

Wage will decrease, and fewer jobs will be available.

A salon's owner used to have one hair stylist and she hired one more. The customers increased from 40 to 75 customers per week. She is paying each stylist $500 per week and charges $30 per haircut. If she adds one more hair stylist, she might get 30 extra customers per week. Should she hire a third hair stylist? Why? - No, the third hair stylist would add $900 to revenue but cost $1,500. - Yes, the marginal revenue product of an extra worker exceeds the wage. - No, the marginal revenue product of an extra worker is less than the wage. - Yes, the third hair stylist would add $3,150 to revenues but cost $1,500.

Yes, the marginal revenue product of an extra worker exceeds the wage.

When the price of inputs decline, your company can produce output more cheaply. This explains the scale effect, which is that you: - may reduce your labor demand since your outputs are cheap. - reduce your scale and may substitute capital for workers. - can produce at a larger scale and may substitute capital for workers. - can produce at a larger scale, so you may require more workers and increase your labor demand.

can produce at a larger scale, so you may require more workers and increase your labor demand.

The interdependence principle reminds us that labor supply decisions are: - connected to other markets, and government policies. - the comparison between the opportunity cost of working and the opportunity cost of not working. - based on your marginal revenue product, which should be greater than or equal to the wage. - based on working more hours as long as the wage is at least as large as the marginal benefit of another hour of leisure.

connected to other markets, and government policies.

A decrease in demand for your product will cause a(n) _____ in your business's labor demand, and a _____ the labor demand curve. - increase; movement along - increase; rightward shift of - decrease; leftward shift of - decrease; movement along

decrease; leftward shift of

Labor demand is downward-sloping because of: - marginal revenue product. - cost-benefit principle. - marginal product of labor. - diminishing marginal product.

diminishing marginal product.

Due to the substitution effect, higher wages provide a _____ incentive to work. Higher wages lead workers to _____ the demand for leisure due to the income effect. - greater; increase - greater; decrease - lower; increase - lower; decrease

greater; increase

The _____ measures how people's choices change when they have more income. - marginal revenue product - income effect - substitution effect - price elasticity of labor supply

income effect

The labor market is driven by: - people's demand for the goods and services that workers provide. - demand and supply of a good or service. - the demand for workers and the supply of a good or service. - the benefit of working and the cost of working.

people's demand for the goods and services that workers provide.

If you love what you do, you'll be more likely to succeed in your career because: - you will not have the opportunity cost of working. - it increases your benefits of not working. - the effort required to succeed comes with a lower opportunity cost. - wages are an important factor in deciding your occupation.

the effort required to succeed comes with a lower opportunity cost.

When there are a lot of identical businesses and a lot of workers with similar skills: - the labor market is perfectly competitive. - an employer has to offer higher wages than its competitors. - an employer can offer wages below the market wage. - businesses and workers compete against one another for higher wages.

the labor market is perfectly competitive.

Wages act as an important signal, directing workers like you into different occupations, which means that the higher the wage, _____. - the more leisure hours people will take - the higher labor needs of the business - the more people will join a specific occupation - the more hours people will work

the more people will join a specific occupation

The price elasticity of the supply of labor measures how: - people respond to a change in relative prices. - people's marginal benefit of labor changes when they work more. - people's choices change when they have more income. - the quantity of labor supplied responds to a price change.

the quantity of labor supplied responds to a price change.