Chapter 17 Markets for Labor

what factors shifts the labor supply curve

- a change in demographics - a change in alternatives available in other markets - a change in population

Which of the following is a reason for choosing a salary system rather than the more profitable​ commission, or​ piece-rate system, of​ compensation?

-difficulty in measuring output -worker dislike of risk -concerns about quality

What happens as a firm increases the number of workers that it​ hires?

Both the marginal product of labor and the marginal revenue product of labor decrease

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.

Is the fact that one group in the population has higher earnings than other groups evidence of economic​ discrimination?

No. Differences in earnings between groups could be due to: -worker productivity. -worker preferences.

What are the five most important variables that cause the market demand curve for labor to​ shift?

The demand curve for labor shifts with changes in human​ capital, technology, the price of the​ product, the quantity of other​ inputs, and the number of firms in the market.

Why is the demand curve for labor downward​ sloping?

The demand curve is downward sloping because of the law of diminishing returns

In what sense do employers who discriminate pay an economic​ penalty?

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

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 marginal revenue products of labor marginal revenue products of labor are relatively high regardless of unions.

Let MRP equal the marginal revenue product of labor and W equal the wage rate. When should a firm hire more workers to increase​ profit?

When MRP > W

what factor does not cause the demand curve for labor to shift

a change in the wage

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 provide an incentive for employees to produce more output provide an incentive for employees to produce more output.

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

compensating differentials

If labor demand is​ unchanged, an increase in labor supply will​ ________ the equilibrium wage and​ ________ the number of workers employed.

decrease; increase

When a firm moves from​ straight-time pay to commission or​ piece-rate pay, the productivity of a​ firm's employees may

increase as less productive employees leave and those who remain have an incentive to sell more.

If labor supply is​ unchanged, an increase in labor demand will​ ________ the equilibrium wage and​ ________ the number of workers employed.

increase; increase

If​ piece-rate or commission systems of compensating workers have important advantages for​ firms, why​ don't more firms use​ them? Some firms​ don't use​ piece-rate or commission systems of compensation because

it is difficult to attribute output to any particular workerattribute output to any particular worker.

Many economists have attempted to measure the effects of economic discrimination on wages. What have they​ concluded? One of their conclusions is that

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

a decline in the wage rate will result in a _______________ the labor demand curve

movement along

Economic discrimination is

paying a person a lower wage or excluding a person from an occupation on the basis of an irrelevant characteristic such as race.

What is the advantage of paying employees a salary instead of a commission for each unit of output​ sold? Employers often pay salaries when

quality is important

a decrease in the price of smartphones will result in a _______________ the labor demand curve

shift in

as wage increases

the demand for labor curve does not shift, but the quantity demanded of labor decreases

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.

If the workers in the dangerous​ factory, absent the safety​ law, experience cognitive dissonance​, then they _________ the true risk of their job.

underestimate

What is a compensating​ differential? Give an example. A compensating differential is

when higher wages are paid to compensate a worker for unpleasant aspects of a​ job, such as when workers are paid higher wages for dirtydirty work.

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 differentials, 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.