Chapter 13 Microeconomics

Differences in wage rates associated with differences in working conditions are called:

Compensating wage differentials.

In a competitive labor market, if a firm pays a worker less than that worker's VMP, then in the long run:

Competing firms will hire the worker away

Suppose it is observed that the equilibrium wage and employment level have both risen in a competitive labor market. One can infer that the:

Demand for labor has increased.

In order to maximize its profits, a firm that hires workers in a perfectly competitive labor market will hire workers until the:

Extra revenue generated from hiring another worker equals the extra cost of hiring that worker.

Those who favor programs aimed at reducing inequality argue that these programs:

Help reduce poverty.

To derive the labor demand curve for a particular market, one should ______for all the firms in the market.

Horizontally sum the value of the marginal product of labor curves

Food stamps and Medicaid are examples of:

In-kind transfer programs.

Curly just graduated from State U and has three job offers: teaching at a prestigious private high school nine months a year with summers off, working forty hours a week at a bank in a small city, and working more than sixty hours a week for a high-powered investment firm in New York. The annual salary for each of these offers is probably:

Lowest at the high school, in the middle at the bank, and highest at the investment firm.

Imposing a minimum wage above the equilibrium wage:

Makes some workers worse off.

The additional output a firm gets from hiring an additional unit of labor is the

Marginal product of labor

The value of marginal product of labor equals the

Marginal product of labor times the net price for which each unit of output sells.

A welfare payment that is reduced when the recipient earns more income is a(n):

Means-tested benefit.

Assume that this graph illustrates a perfectly competitive labor market. In this market, at a wage of $40:

More people would want to work than number of job openings.

Ben and Ashley are identical in every way except for one: Ashley has a master's degree and Ben does not. You would expect Ashley to be paid:

More than Ben

A program under which the government gives all citizens a substantial lump sum payment that is financed by a tax earned income is termed a(n):

Negative income tax.

In 1996, the Personal Responsibility Act:

Placed a five-year lifetime limit on welfare payments to any given recipient.

If the labor market in the United States is perfectly competitive, the labor supply curve would shift to the right if:

The United States relaxed its immigration laws.

A firm is unlikely to hire a worker if:

The additional revenue generated by hiring the worker is less than his or her wage.

In the market for labor, the demand function describes

The number of workers a firm is willing to hire at each wage.

The marginal product of the 14th worker is 8 and the firm sells its output for $4 per unit. If labor is the only variable cost, then the value of the 14th worker's marginal product is

$32

Sam owns a candy factory and hires workers in a competitive labor market to pack cases of candy. The company's weekly output of cases of candy varies with the number of workers hired, as shown in the following table: If each case sells for $5 more than the cost of the materials used in producing it, then the value of marginal product of the 2nd worker is ______ per week.

$750

Consider the accompanying figure representing the labor market below. In the absence of any government intervention, the equilibrium wage is ______ per hour, and the equilibrium employment level is ______ workers per hour.

$8,400

Espresso Yourself Coffee Shop hires workers in a competitive labor market to make coffee. The ingredients required to make each cup of coffee cost 50 cents. The coffee shop's hourly output of coffee varies with the number of workers hired, as shown in the table. Each cup of coffee sells for $2.00. The marginal product of the fourth worker is ______ cups of coffee per hour.

10

When the government transfers resources to the poor in the form of a good or service, it is called:

an in-kind transfer.

Consider the accompanying figure representing the labor market below. Suppose the government passes a minimum wage requiring employers to pay at least $8.00 per hour. After the imposition of the minimum wage, employment will equal ______ person-hours per day.

2,000

Suppose the Fluffy Pillow Company produces pillows. The number of pillows it can produce each hour depends on the number of workers it hires, as shown in the accompanying table. In addition, each pillow can be sold for $2 more than the cost of the materials needed to produce it. If the hourly wage for people who make pillows is $10, then how many workers should the Fluffy Pillow Company hire each hour?

4

A. Jones, who is currently unemployed, is a participant in three means-tested welfare programs: food stamps, rent stamps, and day care stamps. Each program grants him $150 per week in stamps, which can be used like cash to purchase the good or service they cover.a. If benefits in each program are reduced by 40 cents for each additional dollar Jones earns in the labor market, how will Jones's economic position change if he accepts a job paying $120 per week? B. b. Using your findings in part a, the effective marginal tax rate on Jones's earnings from this job would be?

A. Jones would b e worse off by $24 dollars per week. B. Over 100 percent

If the labor market for doctors is perfectly competitive, then an increase in the demand for doctors is likely to cause:

Doctor's wages to increase.

Kyle works for a perfectly competitive firm where he receives a wage rate of $15. From this, one can infer that:

Kyle's value of marginal product is at least $15.

In a competitive labor market, the equilibrium wage rate is determined by:

Labor demand and labor supply.

A group of workers who bargain collectively with employers for higher wages and better working conditions is called a:

Labor union.

Males major in engineering much more frequently than females. Starting salaries for engineers (male or female) are much higher than average. As a result, the observed gender wage gap for all college graduates will be ______ than the gender wage gaps in specific majors because ______.

Larger; males and females choose different majors.

Jobs in which there is a higher risk of injury or death will:

Pay more than otherwise similar jobs.

Those who do not favor programs aimed at reducing inequality argue that these programs:

Reduce people's incentive to work hard.

If workers in one part of the labor market unionize, then all else equal, we would expect the wages of unionized workers to ______, and the wages of non unionized workers to ______.

Rise; fall.

Mountain Breeze supplies air filters to the retail market and hires workers to assemble the components. An air filter sells for $26, and Mountain Breeze can buy the components for each filter for $1. Sandra and Bobby are two workers for Mountain Breeze. Sandra can assemble 60 air filters per month and Bobby can assemble 70. If the labor market is perfectly competitive, how much will Sandra and Bobby be paid?

Sandra will be paid $ 1,500 per month. Bob will be paid $1,750 per month.

Mountain Breeze supplies air filters to the retail market and hires workers to assemble the components. An air filter sells for $26, and Mountain Breeze can buy the components for each filter for $1. Sandra and Bobby are two workers for Mountain Breeze. Sandra can assemble 50 air filters per month and Bobby can assemble 60. If the labor market is perfectly competitive, how much will Sandra and Bobby be paid?

Sandra will be paid $1250 per month. Bob will be paid $1,500.

Suppose Sarah has been offered a position as web designer at Firm A and Firm B. Both firms require their employees to work for 9 hours a day, but Firm A allows its employees to have a flexible work schedule, while Firm B requires its employees to be at work from 9am to 5pm. Otherwise, the jobs are identical. You would expect:

Sarah's wages to be lower at Firm A than at Firm B.

To say that a given welfare program is means-tested implies that:

The more income one earns, the smaller the size of the benefit.

The optimal number of workers for a perfectly competitive firm to hire occurs when

The wage rate equals the value of marginal product of the last worker.

A minimum wage law prohibits employers from paying workers less than a specified hourly wage. If the minimum wage is above the equilibrium wage:

There will be an excess supply of labor.

In competitive labor markets, _____ demand labor and ______ supply labor.

firms, workers

Union membership in the United States probably ______ an important explanation for why workers with similar qualifications earn different incomes because union membership rates are relatively ______.

is not, low.