ECONO 2202 CH 17 The Markets for Labor and Other Factors of Production

A monopsony is A. a buyer of a natural resource such as oil. B. a cartel of firms in an oligopoly. C. the sole buyer of a factor of production. Your answer is correct. D. the buyer of a factor of production whose supply is fixed. E. none of the above.

A monopsony is the sole buyer of a factor of production.

What do some economists feel that part of the difference in wages between white males and other groups is due to? (other than discrimination)

1. differences in education 2. differences in experience 3. differing preferences for jobs

Daniel had been earning ​$67 per hour and working 45 hours per week. Then​ Daniel's wage changes to ​$78 per​ hour, and as a​ result, he now works 40 hours per week. What can we conclude from this information about the income effect and the substitution effect of a wage change for​ Daniel?

The substitution effect causes Daniel to devote more time to working​, the income effect causes Daniel to devote less time to working​, and the substitution effect is smaller than the income effect.

Daniel had been earning ​$73 per hour and working 45 hours per week. Then​ Daniel's wage changes to ​$81 per​ hour, and as a​ result, he now works 40 hours per week. What can we conclude from this information about the income effect and the substitution effect of a wage change for​ Daniel?

The substitution effect causes Daniel to devote more time to working​, the income effect causes Daniel to devote less time to working​, and the substitution effect is smaller than the income effect.

Suppose the wage increases. What effect will this have on a​ worker's labor​ supply?

The substitution effect of a wage increase causes the worker to supply a larger quantity of labor. The income effect of a wage increase causes the worker to supply a smaller quantity of labor. If the substitution effect is bigger than the income​ effect, then the supply curve will slope upward. The income effect of a price​ change: Refers to the change in the quantity demanded of a good that results from changes in consumer purchasing power as a result of a price change. An increase in the wage will increase a​ consumer's purchasing power for any given number of hours worked. For a normal good​, the income effect leads to a larger quantity demanded. Because leisure is a normal​ good, the income effect of a wage increase will cause a worker to devote less time to working and more time to leisure. If the substitution effect of a wage increase causes the worker to supply a larger quantity of​ labor, and the income effect of a wage increase causes the worker to supply a smaller quantity of​ labor, then the labor supply curve will slope upward if the substitution effect is bigger and downward if the income effect is bigger. The substitution effect of a price​ change: Refers to the fact that an increase in price makes a good more expensive relative to other goods. In the case of a wage​ change, the substitution effect refers to the fact that a decrease in the wage lowers the opportunity cost of leisure and causes a worker to devote less time to working and more time to leisure.

The substitution effect

The substitution effect refers to the fact that an increase in the wage raises the opportunity cost of leisure and causes a worker to devote more time to working. The opposite is also​ true: if the wage​ decreases, then the substitution effect will cause a worker to devote less time to working because the opportunity cost of leisure has gone down.

Why are there superstar basketball players but no superstar​ plumbers? There are superstar basketball players but not superstar plumbers A. due to technological advances that have increased the number of viewers for basketball games. Your answer is correct. B. due to discrimination against plumbers. C. because the total value of playing basketball is greater than the total value of fixing toilets. D. due to compensating differentials for unpleasant job aspects. E. because basketball players are members of a labor union but plumbers are not.

due to technological advances that have increased the number of viewers for basketball games.

personnel economics

analyzes the link between differences among jobs and differences in the way workers are paid jobs have different skill requirements, require more or less interactions w/ other workers, have to be performed in more or less pleasant environments, etc. firms need to design compensation policies that take into account these differences among jobs personnel economics also analyzes other human resource policies i.e. promotions, training, and pensions

Writing on the Baseball Prospectus Web​ site, Dan Fox​ argued, ​"What a player is really worth depends in great deal on the teams that are interested in signing​ him." ​Source: Dan​ Fox, "Schrodinger's​ Bat," baseballprospectus.com, May​ 17, 2007. Do you​ agree? Shouldn't a baseball player with a particular level of ability be worth the same to every​ team? Briefly explain. What a baseball player is worth A. depends on the supply of baseball players​, which is the same for each team. B. depends on his marginal product and the price his output sells​ for, both of which are different for each team. C. depends on his marginal product​, which is the same for every team. D. depends on his marginal revenue​ product, which is the same for every team. E. depends on his marginal product and the price his output sells​ for, the latter of which is different for each team.

depends on his marginal product and the price his output sells​ for, the latter of which is different for each team.

The demand for labor is called a derived​ demand, because A. demand for labor is independent of the demand for the good that labor produces. B. demand for labor is the same as the marginal revenue of labor. C. demand for labor is the same as the marginal product of labor. D. demand for labor is derived from the​ firm's output choice.

demand for labor is derived from the​ firm's output choice.

The demand for labor is described as...

derived demand iphone example: Apple's demand for labor to make iphones is derived from the underlying consumer demand for phones so we can say apple's demand for labor depends on two factors 1. the additional iPhones apple can produce if it hires one more worker 2. the additional revenue apple receives from selling the additional ihpones

The market supply curve of labor

determined by adding up quantity of labor supplied by each worker at each wage, holding constant all other variables that might affect the willingness of workers to supply labor

what are the important factors in explaining differences in wages

differences in MRP are the most important, but also, compensating differentials, discrimination, and labor unions

the difficulty of measuring discrimination

differences in wages could be due to discrimination or due to differences in productivity or preferences it's hard to measure the extent of economic discrimination

differences in education

differing levels of education can account for a significant part of the gap between the earnings of different ethnic groups some of the difference in educational levels reflects past and current discrimination

Why is the demand curve for labor downward​ sloping? The demand curve is downward sloping A. due to the law of diminishing returns. Your answer is correct. B. because a firm produces additional output as a result of hiring more workers. C. because the marginal cost of production is downward sloping. D. due to division of labor. E. because the marginal revenue product of labor is upward sloping.

due to the law of diminishing returns.

When MRP < W

the firm should hire fewer workers to increase profits

When MRP > W

the firm should hire more workers to increase profits

marginal product of capital

the increase in output caused by the addition of one more unit of capital. The marginal product of capital diminishes as more and more capital is added

What is the definition of economic​ rent? A. the earnings of a landlord B. the price of a factor of production that is in fixed supply Your answer is correct. C. the price of a resource when that price is only determined by supply D. the marginal revenue product of natural resources

the price of a factor of production that is in fixed supply

economic rent (or pure rent)

the price of a factor of production that is in fixed supply

What is economic​ rent? Economic rent is A. the wage paid to labor. B. the price of a factor of production that is in infinite supply. C. the price of a factor of production that is in fixed supply. Your answer is correct. D. the price of land. E. consumer surplus.

the price of a factor of production that is in fixed supply.

law of diminishing returns

the principle that, at some point, adding more of a variable input, such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline

Monopsony

the situation in which a firm is sole buyer of a factor of production these are very rare (even rarer than monopolies)

marginal productivity theory of income distribution

the theory that the distribution of income is determined by the marginal productivity of the factors of production that individuals own the more factors of production an individual owns, and the more productive those factors are, the higher the individual's income will be ** Remember that in equilibrium, each factor of production receives a price equal to its marginal revenue product. MRP represents the value of a factor's marginal contribution to producing goods and services. Therefore, individuals will receive an income equal to the marginal contribution to production from the factors of production they own.

Sony produces MP3 players. The table below depicts the number of MP3 players various quantities of workers can produce per day.

Suppose the market wage is ​$900 per day. How many workers should Sony hire to maximize​ profits? 5 workers. ​(Enter a numeric response using an​ integer.) If the market wage increases to ​$1300 per​ day, then Sony should hire 2 workers.

marginal revenue product of capital

The change in a firm's revenue as a result of employing one more unit of capital, such as a machine the marginal product of capital curve is the demand curve for capital

An article in the Wall Street Journal discussed why the hotel workers union in New York City was against a proposal for more hotels to be built in​ mid-town Manhattan:​ "The union is concerned that rapid hotel development shrinks room prices and profit​ margins, driving down the wages of its​ members." ​Source: Laura​ Kusisto, "City, Union Seek Hotel Limit in Grand Central​ Area," Wall Street Journal​, June​ 17, 2014.

The demand for hotel workers is derived from the demand for hotel rooms. When the supply of hotel rooms increases and the price of hotel rooms falls​ (the price of the product​ falls), the marginal revenue product falls ​,decreasing the demand for hotel​ workers, and lowering the wage of hotel workers. The​ union's reasoning is consistent with the economic analysis in this chapter. The demand for hotel workers is derived from the demand for hotel rooms. When the price of hotel rooms falls​ (the price of the product​ falls), the marginal revenue product​ falls, decreasing the demand for hotel​ workers, and lowering the wage of hotel workers.

The five most important variables that cause the labor demand curve to shift

1. Human Capital 2. Changes in Technology 3. Changes in the Price of a Product 4. Changes in the Quantity of Other Inputs 5. Changes in the Number of Firms in the Market

Factors that shift the market supply curve of labor

1. Increasing population 2. changing demographics 3. changing alternatives

Equilibrium in the Labor Market

-The quantity of labor demanded is equal to the quantity of labor supplied; occurs at equilibrium wage -Quantity supplied of labor illustrates how many workers are willing to work at various wages -Quantity demanded of labor illustrates how many workers firm is willing to hire at various wages

Suppose a firm produces hardware that plays video games using workers according to the table below. Suppose also that its output sells for ​$150 per unit. 1) Is the firm experiencing the effects predicted by the law of diminishing returnsLOADING...​? The firm is experiencing diminishing returns. 2) What is the marginal revenue product of the third ​worker? The third ​worker's marginal revenue product is ​$1800

1) The firm is experiencing diminishing returns. Law of diminishing returns The principle that at some point adding more of an​ input, such as​ labor, to the same amount of a fixed​ input, such as​ capital, will cause the marginal product of the variable input to decline. Marginal product of labor The additional output a firm produces as a result of hiring one more​ worker: MPL=ΔTotal outputΔLabor. The marginal product of the first worker is 48. The marginal product of the second worker is 24. The marginal product of the third worker is 12. The marginal product of the fourth worker is 6. The marginal product of the fifth worker is 2. Since the marginal product of labor is​ decreasing, the firm is experiencing diminishing returns. 2) $1800 Marginal revenue product of labor The change in a​ firm's revenue as a result of hiring one more​ worker: MRPL=ΔTotal revenueΔLabor. The marginal revenue product of the third worker is ​$1,800​: 12​-unit marginal product of the third worker multiplied by the ​$150 price of the output. Next Question

Frank Gunter owns an apple orchard. He employs 98 apple pickers and pays them ​$15 per hour to pick​ apples, which he sells for ​$5.00 per box. If Frank is maximizing​ profits, what is the marginal revenue productLOADING... of the last worker he​ hired? What is that​ worker's marginal productLOADING...​? Marginal revenue product of the last worker=​$15.00 per hour. ​(Enter your response as an​ integer.) Marginal product of the last worker=3 boxes per hour. ​(Enter your response as an​ integer.)

1) if he's maximizing profits, then MRP = W 2) MP x P = MRP MP x 5.00 = 15 MP= 3

Joe Morgan is a sportscaster and former baseball player. After he stated that he thought the salaries of Major League Baseball players were​ justified, a baseball fan wrote the following to Rob​ Neyer, a sports​ columnist: ​"Mr. Neyer, What are your feelings about Joe​ Morgan's comment that players are justified in being paid what​ they're being​ paid? How is it ok for​ A-Rod [New York Yankees infielder Alex​ Rodriguez] to earn​ $115,000 per GAME while my boss works 80 hour weeks and earns​ $30,000 per​ year?" ​Source: ESPN.com, August​ 30, 2002. How would you answer this​ fan's questions? A. ​A-Rod's marginal product of labor is much higher than the marginal product of labor of the​ fan's boss. B. ​A-Rod's marginal revenue product is much higher than the marginal revenue product of the​ fan's boss. Your answer is correct. C. The New York Yankees earn more revenue than the​ fan's firm. D. The​ fan's boss has a marginal revenue product that is much higher than​ A-Rod's marginal revenue product.

A-Rod's marginal revenue product is much higher than the marginal revenue product of the​ fan's boss.

Do compensating differentials eliminate the need for health and safety laws?

Actually, one implication of compensating differentials is that laws protecting the health and safety of workers may not actually make them better off... but this is really only true if the compensating differential FULLY compensates workers for the additional risk some argue that cognitive dissonance might cause workers to underestimate the true risk of their jobs

Which of the following factors shifts the labor supply​ curve? A. a change in population B. a change in alternatives available in other labor markets C. a change in demographics D. All of the above.

All of the above.

Which of the following is a reason for choosing a salary system rather than the more profitable​ commission, or​ piece-rate system, of​ compensation? A. worker dislike of risk B. concerns about quality C. difficulty in measuring output D. All of the above.

All of the above.

Bloomswood Hotel is situated in​ Forkland, a picturesque town in the mountain region of a country. Allen Grabos works as a gourmet chef at the hotel that caters mostly to tourists. In a conversation with his​ wife, Delia​ Grabos, Allen claims that he is underpaid. The hotel makes up to​ $500,000 per year but his annual salary is only around​ $28,000 a year.​ Delia, however, is of the opinion that since new hotels and inns are expected to open in​ Forkland, the salaries paid to hotel staff in the area should increase. Which of the​ following, if​ true, would weaken​ Allen's claim that he deserves to be better​ compensated? A. ​Allen's marginal productivity is lower than that of his colleagues. B. Recent surveys indicate that the​ lowest-paying jobs in the country include most jobs in​ fast-food joints. C. The total revenue the hotel earned this year was the highest in its history. D. The opportunity cost of working at this hotel is high for Allen. E. ​Allen's neighbor, who runs a department​ store, earns as much as he does.

Allen's marginal productivity is lower than that of his colleagues. This, if​ true, would justify a lower pay for Allen. If he is less productive than his​ colleagues, then it is understandable why he might have a lower compensation. This therefore weakens his claim that he deserves to be paid more. Question 20: Equilibrium in the Labor Market 15

Sean​ Astin, who played Sam in the Lord of the Rings​ movies, wrote the following about an earlier film he had appeared​ in: ​"Now I was in a movie I​ didn't respect, making obscene amounts of money​ (five times what a teacher​ makes, and teachers do infinitely more important​ work) ..." ​Source: Sean​ Astin, with Joe​ Layden, There and Back​ Again: An​ Actor's Tale​, New​ York: St.​ Martin's, 2004, p. 35. Are salaries determined by the importance of the work being​ done? If​ not, what are they determined​ by? Salaries are determined A. by the marginal revenue product of the first worker hired and the supply of labor. B. by​ productivity, as measured by the marginal product of labor. C. by the marginal revenue product of the last worker hired. D. by the importance of the work being​ done, as measured by the total value to society. E. by the marginal revenue product of the last worker hired and the supply of labor.

Are salaries determined by the importance of the work being​ done? If​ not, what are they determined​ by? Salaries are determined by the marginal revenue product of the last worker hired and the supply of labor.

Changes in Technology

As new and better machinery and equipment are developed, workers become more productive. this effect causes the labor demand curve to shift to the right over time

The labor supply curve

As the wage increases, the opportunity cost of leisure increases, causing individuals to supply a greater quantity of labor. Therefore the labor supply curve is upward sloping

Backward-Bending Supply Curve of Labor

As the wage rises, the quantity of labor supplied may eventually decline; the income effect of a higher wage increases the demand for leisure, which reduces the quantity of labor supplied enough to more than offset the substitution effect of a higher wage At high wage levels, the labor supply curve may bend backward, so that higher wages actually result in a smaller quantity of labor supplied. Why? because of the substitution effect and income effect. The substitution effect of a price change refers to the fact that an increase in price makes a good more expensive relative to other goods. In the case of a wage change, the substitution effect refers to the fact that an increase in the wage raises the opportunity cost of leisure and causes a worker to devote more time to working and less time to leisure

What happens as a firm increases the number of workers that it​ hires? A. The marginal product of labor​ decreases, and the marginal revenue product of labor increases. B. Both the marginal product of labor and the marginal revenue product of labor decrease. Your answer is correct. C. The marginal product of labor​ increases, and the marginal revenue product of labor decreases. D. Both the marginal product of labor and the marginal revenue product of labor increase. 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? A. When MRP ​= W B. When MRP ​> W Your answer is correct. C. When MRP​ = 0 D. When MRP ​< W

Both the marginal product of labor and the marginal revenue product of labor decrease. When MRP ​> W

opportunity cost

Cost of the next best alternative use of money, time, or resources when one choice is made rather than another the higher the wage we earn working, the higher the opportunity cost of leisure. Therefore, as wage increases, we tend to take less leisure and work more The supply curve for most people is upward sloping

When an employer pays higher wages to compensate workers for unpleasant aspects of their​ jobs, which of the following is the employer​ offering? A. a compensating differential Your answer is correct. B. a discriminating wage C. a labor union wage D. a risk premium

a compensating differential

Prior to the early twentieth​ century, a worker who was injured on the job could collect damages only by suing his employer. To sue​ successfully, the worker—or his​ family, if the worker had been killed—had to show that the injury was due to the​ employer's negligence, that the worker did not know the job was​ hazardous, and that the​ worker's own negligence had not contributed to the accident. These lawsuits were difficult for workers to​ win, and even workers who had been seriously injured on the job often were unable to collect any damages from their employers. Beginning in​ 1910, most states passed​ "workers' compensation" laws that required employers to purchase insurance that would compensate workers for injuries suffered on the job. A study by Price Fishback and Shawn Kantor of the University of Arizona shows that after the passage of​ workers' compensation​ laws, wages received by workers in the coal and lumber industries fell. ​Source: Price V. Fishback and Shawn Everett​ Kantor, "Did Workers Pay for the Passage of​ Workers' Compensation​ Laws?" Quarterly Journal of Economics​, Vol.​ 100, No.​ 3, August​ 1995, pp.​ 713-742. Passage of​ workers' compensation laws would lead to a fall in wages in some industries because what had​ declined? A. Marginal product of labor. B. Economic rent. C. Marginal revenue product of labor. D. Compensating differentials.

D. Compensating differentials.

Alex Wilson and James Lawrence are discussing the high price of crude oil in the global market.​ Alex, a sociology professor who follows the financial markets​ closely, claims that the volume of trade in oil futures has increased indicating that speculators are responsible for the high oil prices.​ James, who works at an investment​ bank, thinks that the increase in oil prices is​ demand-driven. According to​ him, the higher price of oil reflects growing demand from developing countries. Which of the​ following, if​ true, would weaken​ James' argument? A. Developing countries are using less oil because of substantial investments in renewable energy. B. An increase in oil prices tends to accelerate inflation in growing economies. C. Following a large oil​ spill, some countries have introduced new regulations for offshore oil drilling. D. A private oil drilling firm has recently discovered vast oil deposits off the coast of a remote island country. E. Per capita consumption of oil was higher in the developed countries than in the developing countries during the last year.

Developing countries are using less oil because of substantial investments in renewable energy. James argues that the increase in oil prices is not driven by speculation but by demand from developing countries.​ However, if the developing countries are using alternative sources of​ energy, and are consuming less​ oil, it implies that demand from these countries has declined.

What are the main reasons why firms may choose a salary system?

Difficulty measuring output Concerns about quality Worker dislike of risk

Bloomswood Hotel is situated in​ Forkland, a picturesque town in the mountain region of a country. Allen Grabos works as a gourmet chef at the hotel that caters mostly to tourists. In a conversation with his​ wife, Delia​ Grabos, Allen claims that he is underpaid. The hotel makes up to​ $500,000 per year but his annual salary is only around​ $28,000 a year.​ Delia, however, is of the opinion that since new hotels and inns are expected to open in​ Forkland, the salaries paid to hotel staff in the area should increase. Which of the​ following, if​ true, will weaken​ Delia's argument? A. Spring and summer are the peak tourist seasons in Forkland. B. Tourism revenues in Forkland have been increasing consistently for the past 5 years. C. Due to an increase in the number of fatal accidents recently in​ Forkland, tourism in the area was adversely affected. Your answer is correct. D. Bloomswood sold one of its seaside resorts because tourism in that part of the country declined substantially. E. Bloomswood recently tied up with an event management firm and now organizes weddings and business conferences for its customers.

Due to an increase in the number of fatal accidents recently in​ Forkland, tourism in the area was adversely affected. Delia claims that the salaries paid to hotel​ staff, including​ chefs, will increase because of an increase in demand from the expanding hospitality sector.​ However, if the demand for tourism​ falls, the number of hotels and inns would probably not increase by as much.​ Allen's wages could possibly even fall further. This would weaken​ Delia's argument. OK

Hank Preston is the owner of Preston​ Mechanics, an​ auto-repair shop that does automobile servicing and repairs. Faced with an increasing number of​ customers, Hank decides to revise his compensation policies in order to provide faster and better service. He feels that a​ commission-based system, as opposed to the current​ straight-time pay​ system, will incentivize his workers to service more cars in lesser time. His​ partner, Larry​ Gomez, does not agree. He argues that the commission system will not significantly increase the number of cars being serviced per hour. In​ fact, he feels that productivity and service quality might actually fall. Which of the​ following, if​ true, will strengthen​ Larry's claim? A. The​ piece-rate per car serviced is lower than the hourly wage rate. B. Preston Mechanics is one of the highest paying​ auto-repair shops in the city. C. Preston Mechanics only hires technicians who have cleared the Automotive Service Excellence certification. D. The​ piece-rate system is designed such that workers receive a higher rate once they service a minimum number of cars. E. Each car needs to be serviced simultaneously by multiple workers where the productivity of one affects the productivity of another.

Each car needs to be serviced simultaneously by multiple workers where the productivity of one affects the productivity of another. When employees work in a team with one​ person's productivity affecting the productivity of another​ worker, it is usually very difficult to quantify the work done by each member of the team. Since it is difficult to monitor each​ worker's performance, the commission system may not be​ effective, thus strengthening​ Larry's argument. OK

personnel economics

the application of economic analysis to human resources issues i.e. employee compensation plans

Part 2 of 2 Define economic discrimination. A. 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. Your answer is correct. B. 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 experience. C. Economic discrimination is paying a person a lower wage for unpleasant aspects of a job such as riskiness. D. Economic discrimination is causing a worker to underestimate the true risk of a job such as when jobs are hazardous. E. Economic discrimination is paying a person a lower wage for pleasant aspects of a job such as cleanliness. Is the fact that one group in the population has higher earnings than other groups evidence of economic​ discrimination? A. No. Differences in earnings between groups could be due to worker productivity. B. No. Differences in earnings between groups could be due to worker preferences. C. Yes. If one group earns more than​ another, then this is economic discrimination. D. No. Differences in earnings between groups could be due to negative feedback loops. E. Both a and b

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. Both a and b

Define economic discrimination. A. Economic discrimination is paying a person a lower wage for unpleasant aspects of a job such as riskiness. B. Economic discrimination is causing a worker to underestimate the true risk of a job such as when jobs are hazardous. C. 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 experience. D. 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. E. Economic discrimination is paying a person a lower wage for pleasant aspects of a job such as cleanliness. Is the fact that one group in the population has higher earnings than other groups evidence of economic​ discrimination? A. No. Differences in earnings between groups could be due to worker productivity. B. No. Differences in earnings between groups could be due to worker preferences. C. Yes. If one group earns more than​ another, then this is economic discrimination. D. No. Differences in earnings between groups could be due to negative feedback loops. E. Both a and b.

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. both a and b: Differences in earnings between groups could be due to worker productivity & No. Differences in earnings between groups could be due to worker preferences. Question 21: Explaining Differences in Wages 2

Which of the following is true about economic​ discrimination? A. Economic discrimination is illegal​ and, therefore, impossible. B. Economic discrimination is both legal and many employers engage in it. C. Economic discrimination is​ legal, but few if any employers actually engage in it. D. Economic discrimination is​ illegal, but it is possible that employers ignore the law. Your answer is correct. Most economists believe that only part of the gap between the wages of white males and the wages of other groups is due to discrimination. Economists believe that some of the gap is explained by which of the following​ factors? A. differing preferences for types of jobs B. differences in education C. differences in experience D. All of the above. Your answer is correct. Which of the following is part of the economic analysis of​ discrimination? A. Employers who discriminate pay an economic penalty imposed by market competition. Your answer is correct. B. Employers who discriminate receive an economic reward from retaining only the most productive workers. C. Market competition has entirely eliminated economic discrimination in the United States. D. Employers who discriminate pay an economic penalty because very few workers are willing to work for an employer who discriminates. If discrimination makes it difficult for a member of a group to find employment in a particular​ occupation, his or her incentive to be trained to enter that occupation is reduced. Which of the terms below is most closely associated with this​ situation? A. negative feedback loop Your answer is correct. B. customer discrimination C. irrational expectations D. worker discrimination

Economic discrimination is​ illegal, but it is possible that employers ignore the law. All of the above. Employers who discriminate pay an economic penalty imposed by market competition. negative feedback loop

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 differentialsLOADING...​, 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 A. would make workers in the dangerous factory better off by increasing their marginal revenue product. B. would make workers in the dangerous factory better off by reducing risk. C. would not necessarily make workers in the dangerous factory better off because they otherwise underestimate the true risk of their job. D. would not necessarily make workers in the dangerous factory better off because it would lower their wages. E. would not necessarily make workers in the dangerous factory better off because it would raise the price of the product they produce.

Explaining Differences in Wages 19 would not necessarily make workers in the dangerous factory better off because it would lower their wages. Compensating differentials Higher wages that compensate workers for unpleasant aspects of a job. For​ example, if working in a dangerous factory requires the same degree of education and training as working in a safe​ factory, a larger number of workers will want to work in the safe​ factory, and the wages of workers in the dangerous factory will be higher than the wages of workers in the safe factory. If the government passes a law improving the safety of the dangerous factory such that it is no longer any more dangerous than the safe​ factory, then the higher wages of workers in the dangerous factory will decline until they are the same as the wages of workers in the safe​ factory, and the workers in the dangerous factory will not necessarily be any better off. If the workers in the dangerous​ factory, absent the safety​ law, experience cognitive dissonance​, then they underestimate the true risk of their job. The psychological principle known as cognitive dissonance might cause the workers to underestimate the true risk of their jobs.

When there is a firm with a monopsony in the labor​ market, which of the following​ occurs? A. Fewer workers will be hired at lower wages. Your answer is correct. B. Fewer workers will be hired at higher wages. C. More workers will be hired at higher wages. D. More workers will be hired at lower wages.

Fewer workers will be hired at lower wages.

Difficulty measuring output

Hard to attribute output to any particular worker i.e. project teams of workers vs. assembly line workers

Increases in human capital

Human capital represents the accumulated knowledge and skills that workers acquire from formal training and education or from life experience. For example, a worker with a college education generally has more skills and is more productive than a worker who has only a high school diploma. If workers become more educated and are therefore able to produce more output per day, the demand for their services will increase, shifting the labor demand curve to the right.

Factors that shift the market demand curve for labor

If ANY variable other than the WAGE changes, the result is an increase or a decrease in the demand for labor which we show by a SHIFT of the DEMAND CURVE in constructing the demand curve for labor, we held constant all variables (except for wage) that would affect the willingness of firms to demand labor. An increase or decrease in wages causes an increase or a decrease in the quantity of labor demanded, which we show by a movement ALONG the demand curve

Changes in the Number of Firms in the Market

If new firms enter the market, the labor demand curve will shift to the right. If firms exit the market, the demand for labor will shift to the left. The result is similar to the effect that increasing or decreasing the number of consumers in a market has on the demand for a good.

Question 13: The Supply of Labor 14 Suppose the wage decreases. What effect will this have on a​ worker's labor​ supply?

If the substitution effect of a wage decrease causes the worker to supply a smaller quantity of​ labor, and the income effect of a wage decrease causes the worker to supply a larger quantity of​ labor, then the labor supply curve will slope upward if the substitution effect is bigger and downward if the income effect is bigger. Similar Question The substitution effect of a price​ change: Refers to the fact that an increase in price makes a good more expensive relative to other goods. In the case of a wage​ change, the substitution effect refers to the fact that an increase in the wage raises the opportunity cost of leisure and causes a worker to devote more time to working and less time to leisure. The income effect of a price​ change: Refers to the change in the quantity demanded of a good that results from changes in consumer purchasing power as a result of a price change. An increase in the wage will increase a​ consumer's purchasing power for any given number of hours worked. For a normal good​, the income effect leads to a larger quantity demanded. Because leisure is a normal​ good, the income effect of a wage increase will cause a worker to devote less time to working and more time to leisure.

how might commission or piece-rate payment increase worker productivity?

It provides employees with a monetary incentive to bee more productive because they know that their additional effort will be rewarded with additional compensation

Most labor economists believe that many adult males are on the vertical section of their labor supply curves. Explain when and why​ someone's supply of labor curve would be​ vertical, using the concepts of income and substitution effects. ​Source: Robert​ Whaples, "Is There Consensus among American Labor​ Economists? Survey Results on Forty​ Propositions," Journal of Labor Research​, Vol.​ 17, No.​ 4, Fall 1996. Suppose an adult male is on the vertical section of their labor supply curve.

If the wage increases​, then the substitution effect would prompt the individual to work more hours and the income effect would prompt the individual to work fewer ​hours, with the size of the substitution effect being equal to the size of the income effect​ (in absolute​ value).

In a competitive labor​ market, imposing a minimum wage should reduce the equilibrium level of employment. Will this also be true if the labor market is a monopsony Briefly explain.

Imposing a minimum wage will increase employment because a firm with a monopsony otherwise will hire fewer workers to pay lower wages.

How are the effects on the market from monopoly and monopsony similar?

In both cases, a firm's market power results in a lower equilibrium quantity, a deadweight loss, and a reduction in economic efficiency compared with a competitive market

Through the 2016​ season, Nick​ Saban's record as the head football coach at the University of Alabama was 119 wins and 19 losses. The​ $11.125 million salary the university paid him in 2017 was the highest received by any college football coach. Yet ESPN commentator Scott Van Pelt​ argued, "Alabama is still getting a bargain in Nick​ Saban, and I guarantee you that they know​ that." ​Source: Ben​ George, "ESPN's Scott Van Pelt Explains Why Nick Saban Is​ Underpaid," espn929.com, May​ 4, 2017. Is it possible that Saban might be​ underpaid? A. Yes.​ Saban's marginal revenue product might not be greater than other successful football​ coaches, but​ Saban's marginal product is substantially higher because revenue generated from winning at Alabama is much greater. B. Yes.​ Saban's marginal product and his marginal revenue product must both be larger than other successful football coaches. C. No. If​ Saban's marginal product is not greater than other successful football​ coaches, then Saban is not worth more. D. Yes.​ Saban's marginal product might not be greater than other successful football​ coaches, but​ Saban's marginal revenue product is substantially higher because revenue generated from winning at Alabama is much greater. E. Yes. The total value of winning football games at Alabama is greater than the total value of winning football games at other universities.

Is it possible that Saban might be​ underpaid? Yes.​ Saban's marginal product might not be greater than other successful football​ coaches, but​ Saban's marginal revenue product is substantially higher because revenue generated from winning at Alabama is much greater.

An article in the Wall Street Journal on the use of driverless trucks at Rio​ Tinto's Australian mines​ observes, "The new equipment cut many driving jobs ... But the reductions will be partly offset by new types of work. The company now needs more network technicians ... a hybrid of electrical and mechanical engineering that hardly existed five years​ ago." ​Source: Timothy​ Aeppel, "What Clever Robots Mean for​ Jobs," Wall Street Journal​, February​ 24, 2015. It is likely that total employment at Rio​ Tinto's mines will A. remain unchanged as a result of its use of robots. B. have increased as a result of its use of robots. C. have decreased as a result of its use of robots. The average wage Rio Tinto pays is likely to be A. lower because the jobs created due to robotics are less highly skilled and pay lower wages. B. lower because there are fewer lower paid​ jobs, and more higher paid jobs. C. the same because there are fewer lower paid​ jobs, and more higher paid jobs. D. higher because the jobs created due to robotics are more highly skilled and pay higher wages. Your answer is correct. Are the wages of the truck drivers who were replaced by robots likely to end up higher or lower in their new​ jobs? A. If these workers can acquire the engineering skills to maintain and remotely operate the robotic drills and​ trucks, they could have higher​ wages, but there will be fewer of them. Your answer is correct. B. These workers will likely have lower wages because they cannot acquire the engineering skills to maintain and remotely operate the robotic drills and trucks. C. If these workers can acquire the engineering skills to maintain and remotely operate the robotic drills and​ trucks, they could have higher​ wages, and there will be more of them. D. These workers will likely have lower wages because they will be unlikely to find a job driving trucks.

It is likely that total employment at Rio​ Tinto's mines will have decreased as a result of its use of robots. The new equipment at Rio​ Tinto's Australian mines cut many driving​ jobs, but the reductions will be partly offset by new types of work. The company now needs more network​ technicians, Mr. McGagh​ said, and​ "mechatronics engineers," a hybrid of electrical and mechanical engineering that hardly existed five years ago. The average wage Rio Tinto pays is likely to be higher because the jobs created due to robotics are more highly skilled and pay higher wages. The average wage Rio Tinto pays is likely to be higher because the jobs created due to robotics are more highly skilled and pay higher wages. Are the wages of the truck drivers who were replaced by robots likely to end up higher or lower in their new​ jobs? If these workers can acquire the engineering skills to maintain and remotely operate the robotic drills and​ trucks, they could have higher​ wages, but there will be fewer of them. Rio​ Tinto's incentive to adopt new robotic technology was increased by the high wages-often ​$100,000 per or more-it was having to pay to attract miners and truck drivers to work in remote places. Rio Tinto has substantially increased its demand for network technicians with mechanical engineering and electrical engineering skills to maintain and remotely operate its robotic drills and trucks. If the truck drivers can acquire the engineering skills to maintain and remotely operate the robotic drills and​ trucks, they could have higher​ wages, but there will be fewer of them.

In the island country​ Jambalaya, a debate is on about the gender wage gap among factory workers in the economy. The​ Women's Leadership Foundation​ (WLF), a feminist​ group, attributes the difference in wages to gender discrimination in the workplace. When asked to comment on this​ claim, Bill​ Liamor, the spokesperson for the Chamber of​ Commerce, clearly stated in a press meet that this was not the case. According to​ him, manufacturing firms in Jambalaya were fair and did not discriminate on the basis of gender. Which of the​ following, if​ true, would weaken the​ WLF's argument? A. ​Recently, a study showed that a large proportion of workers in the informal economy in Jambalaya are women. B. Over the past fifty​ years, the divorce rate in Jambalaya has increased and now stands at​ 48.5%. C. Most manufacturing firms in Jambalaya use the​ piece-rate system of payment for workers. Your answer is correct. D. Most industries in Jambalaya are​ capital-intensive. E. The government is undertaking a new program to increase the number of women workers who are affiliated with labor unions in Jambalaya.

Most manufacturing firms in Jambalaya use the​ piece-rate system of payment for workers. If there is a wage gap when the firms use a​ piece-rate system of​ payment, it implies a difference in productivity between male and female workers.

In the island country​ Jambalaya, a debate is on about the gender wage gap among factory workers in the economy. The​ Women's Leadership Foundation​ (WLF), a feminist​ group, attributes the difference in wages to gender discrimination in the workplace. When asked to comment on this​ claim, Bill​ Liamor, the spokesperson for the Chamber of​ Commerce, clearly stated in a press meet that this was not the case. According to​ him, manufacturing firms in Jambalaya were fair and did not discriminate on the basis of gender. Which of the​ following, if​ true, would weaken​ Bill's argument? A. Most measures of worker productivity in​ Jambalaya's factories indicate that men and women are equally productive on average. B. Estimates by the Jambalayan government show that the income effect of a wage increase is stronger for women than for men. C. This​ year, the Jambalayan government reported that employment increased by​ 0.85%. D. The labor force participation rate for women in Jambalaya has more or less increased at the same rate as that for men. E. The annual number of hours worked in Jambalaya increased more for women than for men in the past year.

Most measures of worker productivity in​ Jambalaya's factories indicate that men and women are equally productive on average. Bill argues that gender discrimination cannot explain why women are paid lower wages than men.​ However, if men and women are equally​ productive, one of the reasons for the difference in wages could be discrimination.

can we conclude that competition in markets will eliminate all economic discrimination?

No, that's not completely accurate for 3 key reasons 1. worker discrimination -some workers will practice discrimination which can lead to one group being more skilled and experienced in a certain industry than others 2. customer discrimination -some customers are unwilling to buy from firms that employ certain groups 3. negative feedback loops -some workers will not be incentivized to join certain industries if discrimination makes it difficult for them to join the industry ex. few women became lawyers bc many law firms discriminated against women, and non-discriminating law firms were unable to drive discriminating law firms out of business because there were too few women lawyers available ->essentially it takes a long time to eliminate discrimination for these reasons

The total amount of oil in the earth is not increasing. Does this mean that in the market for​ oil, the supply curve is perfectly​ inelastic? Briefly explain. A. No. The supply curve for oil is not perfectly inelastic because it equals the marginal revenue product of oil. B. No. The supply curve for oil is instead perfectly elastic. C. No. The supply curve for oil is not perfectly inelastic because the quantity supplied still responds to price. Your answer is correct. D. Yes. The supply curve for oil is perfectly inelastic. E. No. The supply curve for oil is not perfectly inelastic because the marginal cost of producing oil is downward sloping.

No. The supply curve for oil is not perfectly inelastic because the quantity supplied still responds to price.

​[Related to the Making the​ Connection] According to Alan​ Krueger, an economist at Princeton​ University, the share of concert ticket revenue received by the top 1 percent of all acts rose from 26 percent in 1982 to 56 percent in 2003. ​Source: Eduardo​ Porter, "More Than​ Ever, It Pays to Be the Top​ Executive," New York Times​, May​ 25, 2007. Does this information indicate that the top acts in 2003 must have been much better performers relative to other acts than was the case in 1982​ (if not, can you think of another​ explanation)? A. No.​ Instead, the supply of concert acts increased between 1982 and 2003. B. No.​ Instead, the demand for concert acts increased between 1982 and 2003. C. No.​ Instead, technological advances increased the number of potential concert viewers between 1982 and 2003. Your answer is correct. D. Yes. The top concert acts had larger marginal products in 2003 than in 1982. E. No.​ Instead, concert acts switched from paying performers based on the number of concerts performed to paying salaries between 1982 and 2003.

No.​ Instead, technological advances increased the number of potential concert viewers between 1982 and 2003.

Hank Preston is the owner of Preston​ Mechanics, an​ auto-repair shop that does automobile servicing and repairs. Faced with an increasing number of​ customers, Hank decides to revise his compensation policies in order to provide faster and better service. He feels that a​ commission-based system, as opposed to the current​ straight-time pay​ system, will incentivize his workers to service more cars in lesser time. His​ partner, Larry​ Gomez, does not agree. He argues that the commission system will not significantly increase the number of cars being serviced per hour. In​ fact, he feels that productivity and service quality might actually fall. Which of the​ following, if​ true, will strengthen​ Hank's claim? A. On​ average, tasks currently are taking more time than expected. B. The market for​ auto-repair workers is competitive. C. The price elasticity of demand for Preston​ Mechanics' services is high. D. Labor costs form a high proportion of Preston​ Mechanics' total costs. E. The fixed cost of setting up an​ auto-repair shop is relatively high.

On​ average, tasks currently are taking more time than expected. If under the present​ system, tasks are taking more time than​ expected, then it is likely that workers are not motivated enough to maximize efficiency. In such a​ situation, shifting to a​ commission-based system that rewards workers based on their productivity might be a good idea.

Mark​ Lai, a student of agricultural science in the developing country​ Mikatra, notes that the demand for rice increased substantially over the last ten years. He attributes this to the substantial growth in population during this period. Although rice cultivation in Mikatra is still​ labor-intensive, Mark observes that the​ inflation-adjusted wages for farm workers in the rice industry have more or less remained constant during this​ period, even though the supply of rice increased. This was contrary to​ Mark's expectations as inflation in Mikatra during this period was not very high. Which of the​ following, if​ true, is most likely to explain this​ outcome? A. Following the recent removal of trade barriers in​ Mikatra, the domestic manufacturing sector registered an impressive increase in output and employment. B. People in Mikatra mostly prefer the imported​ long-grained variety of rice. Your answer is correct. C. Rice and other cereals form a smaller proportion of the food budget of​ higher-income individuals. D. The government of Mikatra has recently set a price floor in the wheat market. E. The government of another major​ rice-producing country,​ Langun, subsidizes its rice farmers to keep its prices competitive in the global market.

People in Mikatra mostly prefer the imported​ long-grained variety of rice. Given​ labor-intensive production, the increase in the demand for rice would have led to an increase in the demand for workers in rice farms. With an increase in demand for​ labor, and limited​ inflation, real wages should have increased.​ However, if people prefer imported​ rice, the demand for workers in rice farms would not increase by as much as Mark expected. This could explain why real wages might not have increased.

State whether each of the following events will result in a movement along the market supply curve of agricultural labor in the United States or whether it will cause the market supply curve of labor to shift. If the supply curve​ shifts, indicate whether it will shift to the left or to the right in the provided graph.

Question 11: The Supply of Labor 8 A decline in the agricultural wage rate will result in a movement along the labor supply curve. A decrease in wages outside of agriculture will result in a shift in the labor supply curve. If the law is changed to allow unlimited immigration into the United​ States, then this will result in a shift in the labor supply curve.

Consider the supply of labor illustrated in the graph to the right. Suppose unemployment benefits increase. Use the line drawing tool to draw a new labor supply curve that shows how this affects the supply of labor. Carefully follow the instructions​ above, and only draw the required objects.

Question 12: The Supply of Labor 10 labor supply shifts left

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 marginal product of labor multiplied by the amount produced. B. The marginal revenue product of labor is equal to the marginal product of labor multiplied by the product price. C. The marginal revenue product of labor is equal to the additional marginal product of labor as a result of hiring one more worker. D. The marginal product of labor is equal to the marginal revenue product of labor divided by the amount produced. E. The marginal product of labor is equal to the marginal revenue product of labor multiplied by the product price.

Question 1: The Demand for Labor 2 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? The marginal revenue product of labor is equal to the marginal product of labor multiplied by the product price.

marginal revenue product of labor

the change in a firm's revenue as a result of hiring one more worker The marginal revenue product of labor is equal to the additional revenue for a firm as a result of hiring one more worker. additional output x product price

​[Related to the Making the​ Connection] An article in the New York Times reports that some firms request job applicants to report their SAT​ scores, even when the job applicant is​ middle-aged and took the test decades before. The article​ notes: "SATs and other academic artifacts remain relevant in part because they are easy—if imperfect—metrics for hiring managers to understand...Academic research has proved that cognitive ability can predict job​ performance, but there is scant evidence linking high SAT scores with employee​ success." ​Source: Melissa​ Korn, "Job​ Hunting? Dig Up Those Old SAT​ Scores," New York​ Times, February​ 25, 2014. When a firm seeks job applicants they may rely on SAT​ scores, or discriminate on the basis of a​ white-sounding name even if the​ applicant's resume is identical to that of an applicant with a​ black-sounding name, because they believe that A. it is easier to form a productive workforce of like people. B. most people will try to come across well in an​ interview, but may be poor job performers. C. cognitive ability and race cannot be inferred from job resumes and interviews. D. these factors are proxies for​ characteristics, such as cognitive ability and​ productivity, that will be valuable for their company.

Question 28: Explaining Differences in Wages 16 these factors are proxies for​ characteristics, such as cognitive ability and​ productivity, that will be valuable for their company.

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 A. human​ capital, technology, the wage​ rate, the quantity of other​ inputs, and the number of firms in the market. B. human​ capital, opportunities in other labor markets​, the price of the​ product, the quantity of other​ inputs, and the number of firms in the market. C. human​ capital, technology, the price of the​ product, the quantity of other​ inputs, and the number of firms in the market. D. human​ capital, minimum wage​ legislation, the wage​ rate, the quantity of other​ inputs, and the number of firms in the market. E. human​ capital, technology, immigration​, the quantity of other​ inputs, and the number of firms in the market.

Question 2: The Demand for Labor 4 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.

State whether each of the following events will result in a movement along the market demand curve for labor in electronics factories in China or whether it will cause the market demand curve for labor to shift. If the demand curve​ shifts, indicate whether it will shift to the left or to the right in the provided graph.

Question 3: The Demand for Labor 6

The following comments were made by two employers regarding a proposed increase in the federal minimum​ wage: Dillon​ Edwards, founder of Parlor​ Coffee: "[The​ increase] should definitely be​ [to] more than​ [$8.75 an​ hour]... It needs to be at least in double​ digits." Beth​ Fahey, owner of Creative​ Cakes: "If you raise the minimum wage....I​ can't raise everybody. If I​ do, the price of a doughnut is going to be​ $3 and​ nobody's going to buy​ it." ​Source: Leslie Josephs and Adam​ Janofsky, "As Minimum Wages​ Rise, Smaller Firms Get​ Squeezed," Wall Street Journal​, June​ 11, 2015. The marginal revenue product of labor is likely to be greater for the employees of A. 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 there is less competition. C. Parlor Coffee because the founder supports a higher minimum​ wage, which indicates that the product price is higher. D. Creative Cakes because the owner opposes a higher minimum​ wage, which indicates that there is more competition.

Question 4: The Demand for Labor 8 Parlor Coffee because the founder supports a higher minimum​ wage, which indicates that the product price is higher. The marginal revenue product of labor is likely to be greater for the employees of Parlor Coffee because the founder supports a higher minimum​ wage, which indicates that the product price is higher. The marginal revenue product for a competitive firm is the marginal product of labor times the product price. If the product price is​ higher, the marginal revenue product is​ higher, making it easier to pay a higher wage. Next Question

In the southern part of the country​ Nirobia, the workers at a factory owned by Mambiki​ & Co. have gone on a strike demanding higher wages. Mambiki​ & Co. is a firm that produces auxiliary defense equipment for aircraft. A national business daily reports that following the closure of the factory for 6​ weeks, the management has finally agreed to the wage hike. Kiah Desmond and her friend Rania​ Ali, both students of​ economics, are discussing the news report in class. Kiah argues that the​ factory's profits are likely to fall due to the wage hike. Rania on the other hand feels that Mambiki will increase the price of their products in order to compensate for the increase in costs. Which of the​ following, if​ true, will strengthen​ Rania's argument? A. In order to reduce dependence on foreign​ suppliers, the Nirobian government recently announced tax exemptions for the defense industry for the next five years. B. The government is the only buyer of the specialized defense equipment produced by Mambiki​ & Co. C. Since most workers at the factory have permanent employment​ contracts, there was a slight fall in productivity with the increase in wage. D. The government is considering the introduction of a price ceiling in the market for auxiliary defense equipment. E. Following the announcement of the wage​ hike, Mambiki's share values dropped significantly.

Question 7: The Demand for Labor 19 Since most workers at the factory have permanent employment​ contracts, there was a slight fall in productivity with the increase in wage A firm usually equates wages with the marginal revenue product of the labor. With an increase in wages on the one hand and a decline in productivity on the​ other, the firm is likely to increase the price of its product to be able to sustain the higher wages. This therefore is likely to strengthen​ Rania's argument that Mambiki will increase prices.

Which of the statements below best describes the marginal productivity theory of income​ distribution? A. Income and productivity necessarily increase with the additional hours people spend at work. B. Workers become productive and receive income only at the margin. C. The distribution of income is determined by the marginal productivity of the factors of production that individuals own. Your answer is correct. D. Income is distributed in a way that encourages workers to increase their productivity.

The distribution of income is determined by the marginal productivity of the factors of production that individuals own.

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

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

If the labor supply curve shifts to the left and the labor demand curve remains​ unchanged, what will happen to the equilibrium wage and the equilibrium level of​ employment? ​1.) Use the line drawing tool to graph a new labor supply curve that has shifted to the left as described above. Label this line ​'Labor supply2​'. ​2.) Use the point drawing tool to indicate the new equilibrium wage and equilibrium level of employment. Label this point​ 'Point A'. Carefully follow the instructions​ above, and only draw the required objects.

The equilibrium wage increases and the equilibrium level of employment decreases Question 15: Equilibrium in the Labor Market 2

what would be the strategy of a firm that has a monopsony in a factor market?

The firm in monopsony would restrict the quantity of the factor demanded to force down the price of the factor and increase the firms profit Example: a firm with a monopsony in a labor market will hire fewer workers and pay lower wages than would be the case in a competitive market. -> results in deadweight loss

When MRP = W

The firm is hiring the optimal number of workers and is maximizing profits.

Changes in the Price of a Product

The marginal revenue product of labor (MRP) depends on the price a firm receives for its output. A higher price increases the marginal revenue product and shifts the labor demand curve to the right. A lower price shifts the labor demand curve to the left.

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 revenue product of labor is equal to the marginal product of labor multiplied by the amount produced. C. The marginal product of labor is equal to the marginal revenue product of labor divided by the amount produced. D. The marginal product of labor is equal to the marginal revenue product of labor multiplied by the product price. E. The marginal revenue product of labor is equal to the marginal product of labor multiplied by the product price.

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

The Market Demand Curve for Labor

The market demand curve for labor is determined by adding up the quantity of labor demanded by each firm at each wage​ rate, holding constant all other variables that might affect the willingness of firms to hire workers.

Portico​ Ltd., is a textile manufacturing company located in the suburbs of the city of Detrigan. In a meeting on productivity and sales​ targets, Portico's production​ manager, Matthew​ Erikson, proposes a hike in the hourly wage rate. He reasons that this increase in the hourly wage rate would result in an increase in productivity and​ consequently, an increase in output. The human resources​ manager, Sam​ Halton, however thinks that the effect of the wage hike on productivity will be ambiguous. He feels that the firm should instead concentrate on nonmonetary incentives. Which of the​ following, if​ true, strengthens Sam​ Halton's claim that the impact of the wage hike on productivity will be​ ambiguous? A. Unseasonal rainfall in some parts of the country is expected to affect this​ year's cotton​ crop, although the extent of the damage is unclear. B. Paying wages based on productivity would be more efficient than paying hourly wages. C. The income elasticity of demand for​ Portico's product is high. D. Workers have been complaining about the existing wages at Portico being too low. E. The opportunity cost of work differs substantially among​ Portico's workers.

The opportunity cost of work differs substantially among​ Portico's workers. The opportunity cost of work will determine the magnitude of the income and substitution effects of a wage hike. In order to determine the overall effect of the​ hike, the sum of both effects must be considered. Since the opportunity cost of work varies for each worker at​ Portico, it may not be possible to predict the exact effect of a wage increase.​ Thus, this option strengthens the claim that the impact of the wage hike on productivity will be ambiguous.

The price of capital is determined by A. equilibrium in the market for​ capital, where the marginal product of capital equals the marginal cost of capital. B. the demand for​ capital, which is the marginal revenue product of capital. C. equilibrium in the market for​ capital, where the marginal revenue product of capital equals the marginal cost of capital. Your answer is correct. D. equilibrium in the market for​ capital, where the marginal revenue product of capital equals the product price. E. equilibrium in the market for​ capital, where the marginal product of capital equals the marginal revenue product of capital.

The price of capital is determined by equilibrium in the market for​ capital, where the marginal revenue product of capital equals the marginal cost of capital.

A columnist writing in the Wall Street Journal argues that because​ "hourly wages in real​ terms" rose, the​ "price of​ time" also rose. ​Source: Brett​ Arends, "Spend Some​ Time, Save Some​ Money," Wall Street Journal​, May​ 19, 2009. What is the​ "price of​ time"? The price of time is A. equal to zero. B. the supply of labor. C. the wage. D. equal to infinity. E. the marginal product of labor. Is the columnist correct that when real hourly wages​ rise, the price of time​ increases? Briefly explain. The columnist is A. incorrect because the quantity of labor demanded decreases when wages rise. B. correct because the wage is the opportunity cost of leisure. C. incorrect because the marginal revenue product of labor eventually diminishes as a firm hires more workers. D. incorrect because the labor supply curve may be backward bending. E. only correct if the substitution effect is larger in absolute value than the income effect.

The price of time is the wage. correct because the wage is the opportunity cost of leisure.

Suppose that a large oil field is discovered in Michigan. By imposing a tax on the​ oil, the state government is able to eliminate the state income tax on wages. What is likely to be the effect on the labor supply curve in​ Michigan? A. The quantity of labor supplied in Michigan will increase. B. The quantity of labor supplied in Michigan will increase if the substitution effect is larger than the income effect. C. The quantity of labor supplied in Michigan will increase if the income effect is larger than the substitution effect. D. The supply curve for labor in Michigan will shift to the right. E. The supply curve for labor in Michigan will shift to the left.

The quantity of labor supplied in Michigan will increase if the substitution effect is larger than the income effect. If the income effect from a wage increase is larger than the substitution ​effect, then the quantity of labor supplied will decrease.

In 541​ A.D., an outbreak of bubonic plague hit the Byzantine Empire. Because the plague was spread by​ flea-infested rats that often lived on​ ships, ports were hit particularly hard. In some​ ports, more than 40 percent of the population died. The emperor Justinian was concerned that the wages of sailors were rising very rapidly as a result of the plague. In 544​ A.D., he placed a ceiling on the wages of sailors. The graph shows the effect of the plague on the wages of sailors. Use this same graph to show the effect of​ Justinian's wage ceiling. ​Source: Michael​ McCormick, The Origins of the European​ Economy: Communications and​ Commerce, A.D., ​300-900​, New​ York: Cambridge University​ Press, 2001, p. 109. ​1.) Use the line drawing tool to draw​ Justinian's wage ceiling imposed at the original equilibrium wage ​'W1​'. Properly label this line. ​2.) Use the point drawing tool to identify the new quantity of labor supplied with this wage ceiling. Label this point ​'L3​'. Carefully follow the instructions​ above, and only draw the required objects. What effect does the wage ceiling have on the quantity of sailors​ employed? A. The quantity of sailors employed remains at L1. B. The quantity of sailors employed falls below L2. Your answer is correct. C. The quantity of sailors employed falls to L2.

The quantity of sailors employed falls below L2.

In 541​ A.D., an outbreak of bubonic plague hit the Byzantine Empire. Because the plague was spread by​ flea-infested rats that often lived on​ ships, ports were hit particularly hard. In some​ ports, more than 40 percent of the population died. The emperor Justinian was concerned that the wages of sailors were rising very rapidly as a result of the plague. In 544​ A.D., he placed a ceiling on the wages of sailors. The graph shows the effect of the plague on the wages of sailors. Use this same graph to show the effect of​ Justinian's wage ceiling. ​Source: Michael​ McCormick, The Origins of the European​ Economy: Communications and​ Commerce, A.D., ​300-900​, New​ York: Cambridge University​ Press, 2001, p. 109. ​1.) Use the line drawing tool to draw​ Justinian's wage ceiling imposed at the original equilibrium wage ​'W1​'. Properly label this line. ​2.) Use the point drawing tool to identify the new quantity of labor supplied with this wage ceiling. Label this point ​'L3​'. What effect does the wage ceiling have on the quantity of sailors​ employed? A. The quantity of sailors employed falls below L2. Your answer is correct. B. The quantity of sailors employed falls to L2. C. The quantity of sailors employed remains at L1.

The quantity of sailors employed falls below L2. Question 18: Equilibrium in the Labor Market 6

income effect of a price change

the change in the quantity demanded of a good due to the effect that the change in its price has on an individual's purchasing power or real income

In the southern part of the country​ Nirobia, the workers at a factory owned by Mambiki​ & Co. have gone on a strike demanding higher wages. Mambiki​ & Co. is a firm that produces auxiliary defense equipment for aircraft. A national business daily reports that following the closure of the factory for 6​ weeks, the management has finally agreed to the wage hike. Kiah Desmond and her friend Rania​ Ali, both students of​ economics, are discussing the news report in class. Kiah argues that the​ factory's profits are likely to fall due to the wage hike. Rania on the other hand feels that Mambiki will increase the price of their products in order to compensate for the increase in costs. Which of the​ following, if​ true, will strengthen​ Kiah's argument? A. The workers at the plant are highly specialized and difficult to replace. Your answer is correct. B. Mambiki​ & Co. also hires contract workers during periods of high demand. C. Competing firms have hiked their prices recently. D. The Nirobian government provides workers with generous social security benefits. E. Firms in the defense equipment industry in Nirobia set up their factories on land that has been leased by the government at concessional rates.

The workers at the plant are highly specialized and difficult to replace. Given that the demand curve for labor is downward​ sloping, fewer workers would be employed at a higher wage.​ However, a scarcity of skilled labor would suggest that demand for labor is inelastic. With inelastic labor​ demand, Mambiki​ & Co. would have to pay the higher wage and take a cut in profits if they cannot increase their price.

Adam Smith operates a pin factory. Suppose Adam faces the situation shown in the following table and the cost of renting a machine is ​$180 per week. Fill in the blanks in the following table where K is the number of​ machines, Q is the output of pins​ (boxes per​ week), MP is the marginal product of​ capital, P is the product price​ (dollars per​ box), MRP is the marginal revenue product of​ capital, R is the rental cost per​ machine, and PROFIT is the additional profit from renting one more machine​ (dollars per​ week). ​First, fill in the marginal product of capital. ​(Enter numeric responses using​ integers.)

The​ profit-maximizing number of machines for Adam to rent is 44 machines. If the marginal revenue product of machines is greater than the rental​ price, then Adam should rent more ​machines; conversely, if the marginal revenue product of machines is less than the rental​ price, then Adam should rent fewer machines. ​1.) Use the line drawing tool to graph​ Adam's demand for capital. Label this line​ 'Demand'. ​2.) Use the point drawing tool to indicate the​ profit-maximizing quantity of capital on your demand curve. Label this point​ 'Point A'. Carefully follow the instructions​ above, and only draw the required

In​ 1879, economist Henry George published Progress and Poverty​, which became one of the​ best-selling books of the nineteenth century. In this​ book, George argued that all existing taxes should be replaced with a single tax on land. In Chapter​ 4, we discussed the concept of tax​ incidence, or the actual division of the burden of a tax between buyers and sellers in a market. If land is​ taxed, how will the burden of the tax be divided between the sellers of land and the buyers of​ land? Assume the land tax is paid by the suppliers of land​ (landowners). ​1.) Use the line drawing tool to illustrate the effect of the tax on land by drawing either a new supply curve for land or a new demand curve for land. Properly label this line. ​2.) Use the point drawing tool to identify the equilibrium price and quantity of land with the tax. Label this point​ 'Point A'. Carefully follow the instructions​ above, and only draw the required objects. Who will bear the burden of the​ tax? A. The government will bear the tax burden. B. Those who supply land​ (landowners) and those who demand land​ (renters) will each bear a portion of the tax burden. C. Those who demand land​ (renters) will bear the tax burden. D. No one will bear the tax burden. E. Those who supply land​ (landowners) will bear the tax burden.

Those who supply land​ (landowners) will bear the tax burden.

strike

Union members refuse to work until a satisfactory agreement is reached If a union is unable to reach an agreement with a company, it has a legal right to call a strike

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. Your answer is correct. 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.

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

What determines the price of natural​ resources? The economic rent or pure rent of natural resources is determined by A. the demand for the natural​ resource, which is the marginal product of the natural resource. B. equilibrium in the market for the natural​ resource, where the marginal revenue product of the natural resource equals the product price. C. the demand for the natural​ resource, which is the marginal revenue product of the natural resource. Your answer is correct. D. equilibrium in the market for the natural​ resource, where the marginal product of the natural resource equals the marginal cost of the natural resource. E. equilibrium in the market for the natural​ resource, where the marginal product of the natural resource equals the marginal revenue product of the natural resource.

What determines the price of natural​ resources? The economic rent or pure rent of natural resources is determined by the demand for the natural​ resource, which is the marginal revenue product of the natural resource. (Marginal revenue product of the natural resource is the resource's demand curve)

Consider the labor market for iphone developers illustrated in the graph to the right.

What is the equilibrium​ wage? ​$250 per hour. ​(Enter a numeric responses using an​ integer.) Now suppose job opportunities for MP3 developers increase. Use the line drawing tool to draw either a new labor supply curve or a new labor demand curve that shows how this affects the labor market for iphone developers. As a result of this​ change, the equilibrium wage increases. Question 19: Equilibrium in the Labor Market 11

Alex Wilson and James Lawrence are discussing the high price of crude oil in the global market.​ Alex, a sociology professor who follows the financial markets​ closely, claims that the volume of trade in oil futures has increased indicating that speculators are responsible for the high oil prices.​ James, who works at an investment​ bank, thinks that the increase in oil prices is​ demand-driven. According to​ him, the higher price of oil reflects growing demand from developing countries. Which of the​ following, if​ true, will weaken​ Alex's claim? A. Most countries provide subsidies and tax breaks to their oil industries. B. New technology is available that significantly reduces the cost of extraction of oil. C. The share values of oil companies have registered a​ 15% gain over the last quarter. D. In the past five​ years, the production of shale​ oil, a substitute for crude​ oil, has increased significantly. E. A group of the major​ oil-producing countries operates as a cartel in the global oil market.

Which of the​ following, if​ true, will weaken​ Alex's claim? A group of the major​ oil-producing countries operates as a cartel in the global oil market. If the global oil market is controlled by a​ cartel, this would imply that prices are high because output has been restricted.​ Alex's claim that speculators are responsible for high prices would be significantly weakened.

Changes in the Quantity of Other Inputs

Workers are able to produce more if they have more machinery and other inputs available to them. The marginal product of labor in the United States is higher than the marginal product of labor in most other countries in large part because U.S. firms provide workers with more machinery and equipment. Over time, workers in the United States have had increasing amounts of other inputs available to them, which has increased their productivity and caused the labor demand curve to shift to the right.

Daniel Hamermesh is an economist at the University of Texas who has done a great deal of research on labor markets. According to an article in Forbes​, Hamermesh writes​ that: ​"below-average-looking men earn​ 17% less than those considered​ good-looking, while​ below-average-looking females earn​ 12% less than their attractive​ counterparts." ​Source: Susan​ Adams, "Does Beauty Really​ Pay?" Forbes​, August​ 30, 2011. Is this difference in earnings due to economic​ discrimination? A. ​No, because ugly people should put some effort into looking better. B. ​No, becuase it impacts men more than women. C. ​Yes, because this is prohibited by the​ Twenty-Second Amendment in the Constitution. D. ​Yes, because it is not acceptable to give someone a lower raise just because they are ugly.

Yes, because it is not acceptable to give someone a lower raise just because they are ugly. Economic discrimination is paying a person a lower​ wage, or excluding a person from an​ occupation, for a reason other than performance.

​Source: U.S. Bureau of Labor​ Statistics, "Usual Weekly Earnings of Wage and Salary​ Workers, First Quarter​ 2015," April​ 21, 2015. Does the fact that Asian males are the​ highest-earning group in the table affect the likelihood that economic discriminationLOADING... is the best explanation for why earnings differ among the groups listed in the​ table? A. ​Yes, the fact that Asian males are the​ highest-earning group is probably related to differences in education or job preference. B. ​Yes, the fact that Asian males are the​ highest-earning group means that economic discrimination is less likely. C. ​No, economic discrimination is just as likely since there is a difference between the weekly earnings for Asian males and white males. D. ​No, economic discrimination is just as likely since there is a difference between the weekly earnings for Asian males and Asian females.

Yes, the fact that Asian males are the​ highest-earning group means that economic discrimination is less likely.

does quantity supplied still respond to price when the quantity of most natural resources is ultimately fixed?

Yes. even though the total quantity of a natural resource is usually fixed, an increase in the price of the good will result in an increase of the quantity supplied during a particular period

Which of the factors listed below does not cause the demand curve for labor to​ shift? A. a change in the price of the product B. a change in human capital C. a change in technology D. a change in the wage Your answer is correct. As the wage​ increases, A. the demand for labor curve does not​ shift, but the quantity demanded of labor decreases. Your answer is correct. B. the demand for labor curve does not​ shift, but the quantity demanded of labor increases. C. the demand for labor curve shifts to the right. D. the demand for labor curve shifts to the left.

a change in the wage the demand for labor curve does not​ shift, but the quantity demanded of labor decreases.

the demand for capital is...

a derived demand.

when deciding how many workers to hire...

a firm is not interested in how much OUTPUT it will increase as it hires another worker, but rather how much REVENUE will increase as it hires another worker. What matters is how much the firm's revenue will rise when it sells the additional output it can produce by hiring one more worker -> this amount is the marginal revenue product of labor (MRP)

Income Effect of a Wage Increase

a higher wage increases a worker's income, increasing the demand for all goods, including leisure, so that the quantity of labor supplied to market work decreases for a normal good, the income effect leads to a larger quantity demanded. Because leisure is a normal good, the income effect of a wage increase will cause a worker to devote less time to working and more time to leisure

Which of the following is an example of a monopsonyLOADING...​? An example of a monopsony is A. a public enterprise in a small town in Florida that is the only supplier of natural gas in that location. B. a public franchise in a small town in Virginia that is the only supplier of water in that location. C. a natural monopoly in a small town in Washington that is the only supplier of electricity in that location. D. De Beers of South Africa, which is the only supplier of diamonds in the world. E. a pineapple plantation on a small island in Hawaii that is the only employer of labor in that location. Compared to perfectly competitive input​ markets, a​ monopsony, such as the pineapple plantation in Hawaii​, A. is more economically efficient because it pays lower wages. B. creates deadweight loss by paying higher wages. C. creates deadweight loss by hiring fewer workers. Your answer is correct. D. creates deadweight loss by producing at lower average cost. E. is more economically efficient because it earns higher profits.

a pineapple plantation on a small island in Hawaii that is the only employer of labor in that location. creates deadweight loss by hiring fewer workers. Monopsony The sole buyer of a factor of production. Examples of monopsonies​ include: 1. A lumber mill in a small town in Oregon. 2. A coal mining firm in a small town in West Virginia. 3. A pineapple plantation on a small island in Hawaii that are the only employers of labor in their locations. A monopsony restricts the quantity of the factor demanded to force down the price of the factor and increase profits. A firm with a monopsony in a labor market will hire fewer workers and pay lower wages than would be the case in a competitive market. Because fewer workers are hired than would be true in a competitive​ market, monopsony results in a deadweight loss.

human resource issues

address how firms hire, train, and promote workers and set their wages and benefits

Use the graphs to the right to answer the questions. What is the equilibrium quantity of sanitary engineers​ hired, and what is the equilibrium​ wage? The equilibrium quantity of sanitary engineers is 8 thousand workers​, and the equilibrium wage is ​$600 per week. What is the equilibrium quantity of receptionists​ hired, and what is the equilibrium​ wage? The equilibrium quantity of receptionists is 12 thousand workers​, and the equilibrium wage is ​$400 per week. Briefly discuss why sanitary engineers might earn a higher weekly wage than receptionists. Sanitary engineers may earn higher wages than receptionists A. due to compensating differentials because the work of sanitary engineers is dirty and unpleasant. B. due to differences in productivity. C. due to discrimination. D. both a and b. E. all of the above. Your answer is correct. Suppose that​ comparable-worth legislation is passed and the government requires that sanitary engineers and receptionists must be paid the same wage of​ $500 per week. Now how many sanitary engineers will be hired and how many receptionists will be​ hired? With the​ comparable-worth legislation, 6 thousand sanitary engineers will be hired ​, and 10 thousand receptionists will be hired.

all of the above.

labor union

an organization of employees that has a legal right to bargain with employers about wages and working conditions

substitution effect

the change in the quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods that are substitutes

Managers of Major League Baseball​ (MLB) teams have the responsibility of running their teams and making many decisions that can affect whether the teams they manage win or lose. Yet in 2014 only 2 of the 30 MLB managers received a salary higher than the average salary paid to baseball players. ​Source: John​ Belaska, "How Much Are MLB Managers Making in​ 2014?" therichest.com, March​ 2, 2014. Provide an economic explanation of why baseball managers and general managers are generally paid less than baseball players. A. The supply of people with the ability to play major league baseball is limited relative to the supply of people with the ability to be managers and GMs. B. The marginal revenue product of a major league baseball player is higher than the marginal revenue product of a manager and a GM. C. The total value of playing baseball is greater than the total value of managing a baseball team. D. Both a and b. Your answer is correct. E. All of the above.

answer: Both a and b A. The supply of people with the ability to play major league baseball is limited relative to the supply of people with the ability to be managers and GMs. B. The marginal revenue product of a major league baseball player is higher than the marginal revenue product of a manager and a GM.

straight-time vs. commission or piece-rate

at a certain quantity, it's more beneficial for a worker to get paid by commission (and vice versa)

Many people have predicted that the price of natural resources should rise consistently over time in comparison to the price of other goods because the demand curve is rising while the supply curve must be shifting inward as natural resources are used up.​ However, the relative prices of most natural resources have not been increasing. Choose the graph showing the demand and supply for natural resources that can explain why prices​ haven't risen, even though demand has increased.

b: where P intersects both supply & demand curves at the same level

According to a​ study, the number of jobs in which firms used​ bonuses, commissions, or piece rates to tie​ workers' pay to their performance increased from an estimated 30 percent of all jobs in the 1970s to 40 percent in the 1990s. ​Source: Thomas​ Lemieux, W. Bentley​ MacLeod, and Daniel​ Parent, "Performance Pay and Wage​ Inequality," Quarterly Journal of Economics​, Vol.​ 124, No.​ 1, February​ 2009, pp.​ 1-49. Why would systems that tie worker pay to how much they produce have become increasingly popular with​ firms? Systems that tie worker pay to how much they produce have become increasingly popular because such systems A. provide incentives for workers to produce more output. B. attract and retain the most productive workers. C. are less likely to result in cognitive dissonance among workers. D. generate more risk for employers. E. both a and b. The same study found that these pay systems were more common in​ higher-paid jobs than in​ lower-paid jobs. What explains this​ result? A. It is less difficult in low​er-paid jobs to measure output. B. It is more difficult in high​er-paid jobs to attribute output to any particular worker. C. Workers in​ higher-paid jobs are more averse to risk. D. Workers in​ lower-paid jobs are more likely to become less concerned about quality. Your answer is correct. E. Both a and b.

both a and b: provide incentives for workers to produce more output & attract and retain the most productive workers. Workers in​ lower-paid jobs are more likely to become less concerned about quality.

What is personnel​ economics? Personnel economics is A. the application of economic analysis to human resource issues such as the link between differences among jobs and differences in the way workers are paid. B. the application of economic analysis to human resource issues such as promotions. C. the study of​ labor-management relations such as the effect of labor unions on wages. D. the study of wages such as the determinants of wages over time. E. both a and b.

both a and b: the application of economic analysis to human resource issues such as the link between differences among jobs and differences in the way workers are paid., the application of economic analysis to human resource issues such as promotions.

​[Related to Making the​ Connection] When the contact lens firm changed the compensation plan for its salespeople from salary plus​ quota-based commission to straight commission on​ sales, who benefited from the​ change? A. both the salespeople and the company Your answer is correct. B. the salespeople C. the company D. all users of the product After implementing the new compensation​ plan, sales increased by more than 20 percent or by nearly​ $80,000 per salesperson per quarter. The new plan succeeded in increasing effort by the sales force by increasing the compensation the salespeople received. The increase in the​ firm's revenue more than offset the increase in its compensation​ cost, resulting in a 6 percent increase in the​ firm's profit. In this​ case, A. the company​ gained, but its competitors also gained. B. the losers were the users of the products who had to pay more. C. there were no​ losers, everyone gained. D. the losers would be those salespeople who have poor sales skills and had previously relied on their salary.

both the salespeople and the company Under the previous​ plan, salespeople received a salary and could also earn a commission on sales over an assigned quarterly quota of the number of lenses sold. Under the new​ plan, compensation consisted of a straight commission on sales. Those salespeople who had relied on the salary would be the losers. the losers would be those salespeople who have poor sales skills and had previously relied on their salary.

substitution effect of a wage increase

causes a worker to supply a larger quantity of​ labor, and the income effect causes a worker to supply a smaller quantity of labor.

Refer to the graph to the right. According to the analysis of compensation in the​ textbook, which line represents the compensation of a salesperson based on​ commission?

commission will be an upward sloping line salary will be a horizontal line

Labor unions are organizations of​ __________ that have the legal right to bargain with​ __________ about​ __________. A. ​employers; employers; wages and working conditions B. ​employees; employers; wages and working conditions Your answer is correct. C. ​employers; employees; wages and working conditions D. None of the above is correct. In the United​ States, how do the average weekly earnings of union workers compare with the earnings of nonunion​ workers? A. The earnings of union workers are lower than the earnings of nonunion workers. B. There is no way to compare the wages of union and nonunion workers. C. The earnings of union workers are higher than the earnings of nonunion workers. Your answer is correct. D. The earnings of union workers are almost identical to the earnings of nonunion workers.

employees; employers; wages and working conditions The earnings of union workers are higher than the earnings of nonunion workers.

why do some economists believe that, in the long run, markets can undermine economic discrimination?

employers who discriminate pay an economic penalty

firms producing capital goods...

face increasing marginal costs, so the supply curve of capital goods is upward sloping

The market demand curve for labor is determined by adding up the wages for each worker at each quantity of labor​ demanded, holding constant all other variables that might affect the willingness of firms to hire workers. A. True. B. False.

false

The market supply curve of labor is determined by adding up the wages for each worker at each quantity of labor​ supplied, holding constant all other variables that might affect the willingness of workers to supply labor. A. True. B. False.

false

what are the factors of production used for?

firms use these to produce goods and services

During the​ 1970s, many women changed their minds about whether they would leave the labor force after marrying and having children or whether they would be in the labor force most of their adult lives. In​ 1968, the National Longitudinal Survey asked a representative sample of women aged 14 to 24 whether they expected to be in the labor force at age 35. ​ Twenty-nine percent of white women and 59 percent of black women responded that they expected to be in the labor force at that age. In​ fact, when these women were​ 35, 60 percent of those who were married and 80 percent of those who were unmarried were in the labor force. In other​ words, many more women ended up being in the labor force than expected to be when they were of high school and college age. ​Source: Claudia​ Goldin, Explaining the Gender​ Gap: An Economic History of American Women​, New​ York: Oxford University​ Press, 1990, p. 155. What impact did this fact have on the earnings of these​ women? Briefly explain. Had they known they would be in the labor​ force, then the earnings of these women would have been A. higher because they would have sought more training. Your answer is correct. B. unchanged due to feedback loops. C. lower because they would have sought to obtain less education. D. higher because they would have taken jobs where experience was less important. E. higher because they would have entered the labor force at a younger age.

higher because they would have sought more training.

compensating differentials

higher wages that compensate workers for unpleasant aspects of a job

Baseball writer Rany Jazayerli assessed the Kansas City​ Royal's outfielder Jose Guillen as​ follows: ​"Guillen has negative value the way his contract​ stands." ​Source: Rany​ Jazayerli, "Radical Situations Call for Radical​ Solutions," ranyontheroyals.com, June​ 6, 2009. How could a baseball​ player's contract cause him to have negative value to a baseball​ team? Jose Guillen would have negative value to the Kansas City Royals if A. his salary is greater than his marginal product. B. his salary is greater than the additional revenue he generates. Your answer is correct. C. his salary is greater than his output. D. the marginal revenue product of labor is decreasing. E. his marginal revenue product is greater than his salary.

his salary is greater than the additional revenue he generates.

Can monopsonies be combated?

in some cases, monopsony in labor markets can be offset by worker membership in a labor union

We can use the demand and supply model to analyze why wages differ

in the labor market, equilibrium wage = marginal revenue product of labor the more productive workers are and the higher price for which worker's output can be sold, the higher wages workers will receive so why do some wages differ? some professions simply just have a MRP higher than others -> demand is very high also, some professions have a limited supply

What is the marginal productivity theory of income​ distribution? The marginal productivity theory of income distribution suggests that A. income is determined by the marginal productivity of the factors of production that individuals own. Your answer is correct. B. income is determined by the total productivity of the factors of production that individuals own. C. income is determined by economic​ discrimination, where some workers receive lower wages based on irrelevant characteristics such as race or gender. D. income is determined by the marginal cost of the factors of production that individuals own. E. income is determined by compensating​ differentials, where higher wages are paid to compensate individuals for unpleasant aspects of a job.

income is determined by the marginal productivity of the factors of production that individuals own.

When a firm moves from​ straight-time pay to commission or​ piece-rate pay, the productivity of a​ firm's employees may A. fall as they assume more risk but and have no incentive to sell more. B. increase as less productive employees leave and those who remain have an incentive to sell more. C. be affected as the employees who assume lower risk for higher pay. D. decrease as less productive employees leave and those who remain have no incentive to sell more.

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

When a firm moves from​ straight-time pay to commission or​ piece-rate pay, the productivity of a​ firm's employees may A. increase as less productive employees leave and those who remain have an incentive to sell more. Your answer is correct. B. fall as they assume more risk but and have no incentive to sell more. C. be affected as the employees who assume lower risk for higher pay. D. decrease as less productive employees leave and those who remain have no incentive to sell more.

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. A. ​increase; decrease B. ​decrease; decrease C. ​decrease; increase D. ​increase; increase

increase; increase

effect of an increase in labor demand

increases in labor demand will cause the equilibrium wage and the equilibrium level of employment to rise: 1) if the productivity of workers rises, the marginal revenue product increases, causing the labor demand curve to shift to the right 2) the equilibrium wage rises from W1 to W2 3) the equilibrium level of employment rises from L1 to L2

the effect of an increase in labor supply

increases in labor supply will cause the equilibrium wage to fall but the equilibrium level of employment to rise 1. as population increases, the labor supply curve shifts to the right 2. as equilibrium wage falls from w1 to w2 3) the equilibrium level of employment increases from l1 to l2

the rental price of capital...

is determined by demand and supply in the market for capital. in equilibrium, the rental price of capital is equal to the marginal revenue product of capital

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 A. it is difficult to attribute output to any particular worker. B. such forms of compensation impose less risk on workers. C. such forms of compensation provide less incentive for workers to produce more output. D. such forms of compensation tend to attract the least productive workers. E. some firms are more concerned about quantity of output than quality.

it is difficult to attribute output to any particular worker.

What is the advantage of paying employees a salary instead of a commission for each unit of output​ sold? Employers often pay salaries when A. workers are risk loving. B. it's difficult to measure productivity. C. quality is not important. D. ​it's important to hire productive workers. E. increasing productivity is important.

it's difficult to measure productivity.

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. labor supply and labor demand in that market. Your answer is correct. C. the marginal contribution of the last worker. D. the number of employees in the enterprise. Is there a connection between how people are paid and what they contribute to​ people's well​ being? A. ​Yes, because if the output of a market improves well​ being, then all else​ equal, more firms will supply the​ product, the labor used to produce it will​ rise, and the wage rate will fall. B. ​No, because if the output of a market improves well​ being, then all else​ equal, fewer people will demand the​ product, the labor used to produce it will​ fall, and the wage rate will fall. C. ​Yes, because if the output of a market improves well​ being, then all else​ equal, more people will demand the​ product, the labor used to produce it will​ increase, and the wage rate will rise. Your answer is correct. D. ​No, because if the output of a market improves well​ being, then all else​ equal, fewer firms will supply the​ product, the labor used to produce it will​ fall, and the wage rate will rise.

labor supply and labor demand in that market. The intersection between labor supply and labor demand determines the equilibrium wage and the equilibrium level of employment. If labor supply is​ unchanged, an increase in labor demand will increase both the equilibrium wage and the number of workers employed. If labor demand is​ unchanged, an increase in labor supply will lower the equilibrium wage and increase the number of workers employed. Yes, because if the output of a market improves well​ being, then all else​ equal, more people will demand the​ product, the labor used to produce it will​ increase, and the wage rate will rise. If the output of a market improves well​ being, then all else​ equal, more people will demand the​ product, the labor used to produce it will​ increase, and the wage rate will rise.

factors of production

land (natural resources) , labor, capital, entrepreneurship

income effect

the change in the quantity demanded of a good that results from the effect of a change in the good's price on consumers' purchasing power

derived demand

the demand for a factor of production; it depends on the demand for the good the factor produces

What effect does experience have on the wage gap between men and​ women? Comparing men and women of the same​ age, many women A. who are single have more work experience than married​ women, which raises​ productivity, resulting in single women earning more than​ men, but men earning more than married women. B. leave the workforce after having a​ child, so men have more work​ experience, but this does not affect productivity or the​ male-female wage gap. C. who are married have more work experience than single​ women, which raises​ productivity, resulting in a larger wage gap between men and single women than between men and married women. D. leave the workforce after having a​ child, so men have more work​ experience, which raises productivity and increases the​ male-female wage gap. E. have multiple career interruptions compared to only one career interruption for​ men, both of which lower productivity and lower the​ male-female wage gap.

leave the workforce after having a​ child, so men have more work​ experience, which raises productivity and increases the​ male-female wage gap. Experience: Workers with greater experience​ are, on​ average, more​ productive, and women tend to have less experience than men. Women are much more likely than men to leave their jobs for a period of time after having a child. Women with several children will sometimes have several interruptions in their careers. Some women leave the workforce for several years until their children are of school age. As a​ result, on​ average, women with children have less workforce experience than do men of the same age. Because workers with greater experience​ are, on​ average, more​ productive, the difference in levels of experience helps to explain some of the difference in earnings between men and women.

Increasing population

more births than deaths, and an increase in immigration shifts supply curve of labor to the right

A columnist in the New York Times notes that the U.S. labor supply​ "in the next decade is expected to expand at less than half the pace of the​ 1960s, 1970s and​ 1980s." ​Source: Eduardo​ Porter, "The Payoff in Delaying​ Retirement," New York Times​, March​ 5, 2013. These changes in the growth rates in the U.S. labor supply are the result of A. an increase in the immigrant population. B. a drop in the immigrant population. C. fewer people wanting to work because their incomes are high enough. D. more retirements and fewer families beginning to have two wage earners.

more retirements and fewer families beginning to have two wage earners. The most important variables that shift the labor supply curve are increases in​ population, changing​ demographics, and changing alternatives. In the next​ decade, the growth of the labor supply is expected to expand at less than half the pace of the​ 1960s, 1970s and 1980s. The growth of the labor supply is slowed by the retirement of the boomer generation and an end of the labor market effect of women entering the labor force for the first time.

difference in wages as the price of risk

only when workers have been fully compensated with higher wages for the additional risk they assume, will firms be able to attract enough workers willingness to assume risk and how much higher thee wage must be to compensate for assuming more risk

changing alternatives

opportunities available in other labor markets, and generous unemployment benefits can cause changes in the supply of labor in particular markets. workers enter industry (right) workers exit industry (left)

In most​ jobs, the harder you​ work, the more you earn. Some workers would rather work harder and earn​ more; others would rather work less​ hard, even though as a result they earn less. ​ Suppose, though, that all workers at a company fall into the​ "work harder and earn​ more" group. Suppose also that the workers all have the same abilities. In these​ circumstances, would output per worker be the same under an hourly wage compensation system as under a​ piece-rate system? Briefly explain. Compared to an hourly wage compensation​ system, under a​ piece-rate system A. output would be lower because workers will incur less risk. B. output would be lower because workers who would rather work less hard will be attracted. C. output would be higher because workers will incur less risk. D. output would be higher because workers will have incentive to produce more. E. output would be lower because workers who would rather work harder will be retained.

output would be higher because workers will have incentive to produce more.

economic discrimination

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

Worker dislike of risk

piece-rate or commission systems of compensation increase worker's risk bc sometimes output declines for reasons that are not connected to the workers effort

When employers interview a job applicant with a​ white-sounding name and not an applicant with an​ African-American-sounding name, they are actually A. responding to differences in education. B. practicing racial discrimination. Your answer is correct. C. responding to differences in productivity. D. responding to differences in experience. Leaving aside legal​ penalties, the employers who follow this practice A. will also enjoy an economic benefit from very high profit in the long run. B. will also incur an economic cost that is imposed on them by the consumers. C. will also incur an economic penalty that is imposed on them by the government. D. will also incur an economic penalty that is imposed on them by the market.

practicing racial discrimination. will also incur an economic penalty that is imposed on them by the market.

in equilibrium, suppliers of capital,

receive a rental price equal to the marginal revenue product of capital, just as suppliers of labor receive a wage equal tot he marginal revenue product of labor

What effect does education have on the wage gap between whites and​ African-Americans? Many blacks A. have less schooling than whites​, which decreases the​ white-black wage gap. B. receive a substandard education in inner−city schools​, which increases the​ white-black wage gap. Your answer is correct. C. receive equivalent schooling as​ whites, which increases the​ white-black wage gap. D. receive a superior education​, which helps decrease the​ white-black wage gap. E. have less schooling than whites​, which has no effect on the​ white-black wage gap.

receive a substandard education in inner−city schools​, which increases the​ white-black wage gap. Differences in​ education: Some of the difference between the incomes of whites and the incomes of blacks can be explained by differences in education. ​Historically, African-Americans have had less schooling than whites. In​ addition, many blacks receive a substandard education in​ inner-city schools. Not​ surprisingly, studies have shown that differing levels of education can account for a significant part of the gap between the earnings of whites and blacks.

For​ years, the Goodyear Tire​ & Rubber Company compensated its sales force by paying a salesperson a salary plus a bonus based on the number of tires he or she sold. In early​ 2002, Goodyear made two changes to this​ policy: ​(1) The basis for the bonus was changed from the quantity of tires sold to the revenue from tires​ sold, and ​(2) salespeople were required to get approval from corporate headquarters in​ Akron, Ohio, before offering to sell tires to customers at reduced prices. ​Source: Timothy​ Aeppel, "Amid Weak​ Inflation, Firms Turn Creative to Boost​ Prices," Wall Street Journal​, September​ 18, 2002. Explain why these changes were likely to increase​ Goodyear's profits. These changes were likely to increase​ Goodyear's profits because previously A. salespeople were too concerned about quality. B. salespeople were not compensated with a​ piece-rate or commission system. C. salespeople had an incentive to sell more tires by reducing tire prices. D. salespeople incurred a substantial amount of risk. E. it was difficult to measure sales of tires.

salespeople had an incentive to sell more tires by reducing tire prices.

The fraction of U.S. workers in labor unions is ___ than in other countries.

smaller than

Do union members earn more than nonunion members because they are in unions?

sort of... economists estimate that being in a union increases a worker's wages about 10%, holding all other factors constant. In reality, the benefit of union membership depends a lot on the industry one is in. in the u.s. Union: $970/week; Nonunion: $763/week a better question is whether unions raise the total amount of wages received by all workers, whether unionized or not. Bc the share of national income received by workers has remained roughly constant over the years, many economists do not believe that unions have raised the total amount of wages received by workers

Should worker's pay depend on how much they work or on how much they produce?

straight-time pay: a certain wage per hour or salary per week or month, etc. commission or piece-rate pay: a wage baed on how much output a worker produces

what has led to a skewed distribution of income in some professions?

technological change

marginal product of labor

the additional output a firm produces as a result of hiring one more worker The marginal product of labor is equal to the additional output a firm produces as a result of hiring one more worker. we calculate this as the change in total output as each additional worker is hired because of the law of diminishing returns, the marginal product of labor declines as the firm hires more workers

At the​ equilibrium, the price of capital is equal to A. the marginal revenue product of labor. B. the marginal revenue product of capital. Your answer is correct. C. the marginal product of capital. D. None of the above.

the marginal revenue product of capital.

the marginal revenue product of labor and the demand for labor explained

the marginal revenue product of labor = the marginal product of labor multiplied by the price of the good the marginal revenue product curve slopes downward bc diminishing returns causes the marginal product of labor to decline as more workers are hired a firm maximizes profits by hiring workers up to the point where the wage = the marginal revenue product of labor the marginal revenue product of labor curve is the firm's demand curve for labor bc it tells the firm the profit-maximizing quantity of workers to hire at each wage i.e. using this demand curve, if the wage is $600, the firm will hire 4 workers

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 A. the marginal revenue product of major league baseball players is high relative to college professors. B. the supply of major league baseball players is more inelastic than the supply of college professors. C. the marginal product of major league baseball players is low relative to college professors. D. the total value of baseball games is greater than the total value of education. E. the supply of major league baseball players is abundant relative to the supply of college professors.

the marginal revenue product of major league baseball players is high relative to college professors. The equilibrium wage In a competitive labor​ market, the equilibrium wage equals the marginal revenue product of labor. The more productive workers are and the higher the price​ workers' output can be sold​ for, the higher the wages workers will receive. 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. In​ addition, the supply of people with the ability to play major league baseball is also very limited.

marginal revenue product of natural resources

the marginal revenue product of natural resources is the change in a firm's revenue as a result of employing one more unit of natural resources (i.e.) a barrel of oil marginal revenue product of natural resources is also the demand curve for natural resources

[Related to the Chapter​ Opener] Sam​ Goldwyn, a movie producer during​ Hollywood's Golden​ Age, once remarked about one of his​ stars: "We're overpaying​ him, but​ he's worth​ it." a. Goldwyn was overpaying this star because A. the star was a good friend of the producer and the owner of the movie production company. B. the marginal revenue product of this star was very high and the supply of people with this kind of star quality was low. Your answer is correct. C. the marginal revenue product of this star was very low and the supply of people with this kind of star quality was high. D. the marginal product of this star was very low and the supply of people with this kind of star quality was high. b. The star have would still have been worth the high payment because A. the production company did not earn a high revenue due to the low marginal revenue product of the star. B. the production company earned a very low revenue due to the high marginal product of the star. C. the production company earned a very high revenue due to the high marginal revenue product of the star. Your answer is correct. D. the production company did not earn a high revenue due to the high marginal cost of the star.

the marginal revenue product of this star was very high and the supply of people with this kind of star quality was low. the production company earned a very high revenue due to the high marginal revenue product of the star.

equilibrium in the market for natural resources

the market for a natural resource can have an upward-sloping or vertical supply curve an upward-sloping supply curve means that the price of the natural resource is determined by the interaction of supply and demand a vertical supply curve means that the quantity supplied of the natural resource does not respond to changes in price and is ONLY determined by demand. The price of a factor of production with a vertical supply curve is called an economic or pure rent

Changing Demographics

the more people ages 16-65, the greater the quantity of labor supplied baby booms (right) low birth (left) rates also shift quantity of labor supplied Labor force participation of women (right shift)

What is a​ monopsony? A monopsony is A. a competitive market for a factor of production. B. the only buyer of a factor of production. C. a firm that demands labor as a factor of production. D. a market for a factor of production in which the factor is in fixed supply. E. the only seller of a good or service.

the only buyer of a factor of production.

unionization in high income countries

the percentage of the labor force belonging to unions is lower in the U.S. than in most other high income countries

How can we measure the opportunity cost of​ leisure? The opportunity cost of leisure is A. the wage rate. Your answer is correct. B. economic rent. C. the marginal product of labor. D. a compensating differential. E. economic discrimination. The substitution effect of a wage increase A. causes a worker to supply the same quantity of​ labor, and the income effect causes a worker to supply a smaller quantity of leisure. B. causes a worker to supply a larger quantity of​ labor, and the income effect causes a worker to supply a smaller quantity of labor. Your answer is correct. C. causes a worker to supply a smaller quantity of​ labor, and the income effect causes a worker to supply a larger quantity of labor. D. causes a worker to supply a larger quantity of​ leisure, but the income effect causes a worker to supply a smaller quantity of leisure. Why is the supply curve of labor usually upward​ sloping? A. As the wage​ increases, the opportunity cost of labor​ increases, causing individuals to devote more time to working. B. As the wage increases​, purchasing power increases​, causing individuals to devote more time to working because leisure is an inferior good. C. As the wage increases​, the opportunity cost of leisure increases​, causing individuals to devote more time to working. Your answer is correct. D. As the wage decreases​, purchasing power decreases​, causing individuals to devote less time to working because leisure is a normal good. E. As the wage​ increases, purchasing power​ increases, causing individuals to devote less time to working because leisure is a normal good.

the wage rate. causes a worker to supply a larger quantity of​ labor, and the income effect causes a worker to supply a smaller quantity of labor. As the wage increases​, the opportunity cost of leisure increases​, causing individuals to devote more time to working.

A columnist writing in the Wall Street Journal argues that because​ "hourly wages in real​ terms" rose, the​ "price of​ time" also rose. ​Source: Brett​ Arends, "Spend Some​ Time, Save Some​ Money," Wall Street Journal​, May​ 19, 2009. What is the​ "price of​ time"? The price of time is A. equal to zero. B. the demand for labor. C. equal to infinity. D. the marginal product of labor. E. the wage. Your answer is correct. Is the columnist correct that when real hourly wages​ rise, the price of time​ increases? Briefly explain. The columnist is A. incorrect because the marginal revenue product of labor eventually diminishes as a firm hires more workers. B. incorrect because the quantity of labor demanded decreases when wages rise. C. only correct if the income effect is larger in absolute value than the substitution effect. D. incorrect because the labor supply curve may be backward bending. E. correct because the wage is the opportunity cost of leisure.

the wage. correct because the wage is the opportunity cost of leisure.

differing preferences for jobs

there are significant differences between the types of jobs held by men and women i.e. teachers, childcare, dental assistants are predominantly women (relatively low-paying) pilots, engineering, electricians are predominantly men (relatively high-paying) representation is due to discrimination but also preferences i.e. some women may take lower paying jobs so that they work less hours so they can take care of their children

What are the three most important variables that cause the market supply curve for labor to​ shift? The supply curve for labor shifts with changes in A. the​ population, demographics, and opportunities in other labor markets. B. immigration​, minimum wage​ legislation, and the wage rate. C. the​ population, the number of firms in the market​, and opportunities in other labor markets. D. technology​, ​demographics, and opportunities in other labor markets. E. the​ population, the wage​ rate, and opportunities in other labor markets.

the​ population, demographics, and opportunities in other labor markets. If any variable other than the wage rate​ changes, then the result is an increase or a decrease in the supply for​ labor, which causes a shift in the supply curve. The three most important variables that cause the labor supply curve to shift are changes in population​ (for example, increases due to​ immigration), demographics​ (for example, the age distribution of the​ population), and alternative opportunities​ (such as opportunities in other labor markets or the generosity of unemployment​ insurance).

Market for Natural Resources

when a firm is considering employing more natural resources, the value it receives equals the increase in the firm's revenue from selling the additional output it can produce by buying the natural resources... so, the demand for natural resources is a derived demand

If labor demand is​ unchanged, a decrease in labor supply will​ ________ the equilibrium wage and​ ________ the number of workers employed. A. ​increase; decrease Your answer is correct. B. ​decrease; decrease C. ​decrease; increase D. ​increase; increase

​increase; decrease

What is a compensating​ differential? Give an example. A compensating differential is A. when workers underestimate the true risk of their​ job, such as when workers refuse to believe their job is hazardous. B. when a person is paid a lower wage or excluded from an occupation based on an irrelevant individual characteristic such as race. C. when higher wages are paid to compensate a worker for unpleasant aspects of a​ job, such as when workers are paid higher wages for safer work. D. when a person is paid a lower wage or excluded from an occupation based on an irrelevant individual characteristic such as a person being dishonorable. E. when higher wages are paid to compensate a worker for unpleasant aspects of a​ job, such as when workers are paid higher wages for dirty work.

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

Many companies that pay workers an hourly wage require some minimum level of acceptable output. Suppose a company that has been using this system decides to switch to a​ piece-rate system under which workers are compensated on the basis of how much output they produce but where they are also free to choose how much to produce. Is it likely that workers under a​ piece-rate system will end up choosing to produce less than the minimum output required under the hourly wage​ system? Briefly explain. Switching to the​ piece-rate system​ (compared to the minimum output required under the hourly wage​ system) likely A. will not result in workers producing less output because more productive workers will be retained. B. will result in workers producing less output because more productive workers will be attracted. C. will result in workers producing more output because they will incur less risk. D. will result in workers producing less output because more productive workers will quit and take jobs elsewhere. E. will not result in workers producing less output because they will have less incentive to produce beyond the minimum level previously required.

will not result in workers producing less output because more productive workers will be retained.

Lawrence​ Katz, an economist at​ Harvard, was quoted in a newspaper article as arguing that differences between the incomes of male physicians and female physicians​ "are largely explained by individual​ choices." He also noted that discrimination could account for part of the gap​ "though it​ isn't clear how​ much." ​Source: Josh​ Mitchell, "Women Notch​ Progress," New York Times​, December​ 4, 2012. When Katz used the phrase​ "individual choices," he meant that female physicians may A. choose to work with female patients. B. work fewer hours or take time off for child care. C. choose to work in a group. D. choose to marry male physicians. These individual choices can result in differences between how much men and women are paid because A. they influence the joint income of a married couple. B. they will result in differences in experience and skill over time. Your answer is correct. C. female patients pay less. D. the average income of all physicians in the group will be lower. It is difficult to estimate how much of the gap between what men and women are paid is due to discrimination because A. the age of the physicians is not disclosed. B. there are many other factors that influence wage differences. Your answer is correct. C. some work for hospitals and some are in private practice. D. wages are not readily disclosed.

work fewer hours or take time off for child care. they will result in differences in experience and skill over time. there are many other factors that influence wage differences.

Concerns about quality

workers may become less concerned about quality if they're focused on speed/ output

Differences in experience

workers with greater experience are, on average, more productive. so the difference in levels of experience explains how some of the difference in earnings between certain groups comes to be

Adam operates a pin factory. Suppose Adam faces the situation shown in the table below and the cost of renting a machine is​ $550 per week.

​(i​) Marginal product of capital is 9. ​(ii​) Total revenue is ​$2800. ​(iii​) Marginal revenue product of capital is ​$600. ​(iv​) Additional profit from renting one more machine is ​$-50. The​ profit-maximizing number of machines for Adam to rent is 4.

During the same period that robots and other new technologies have been affecting the labor​ market, there has been an increase in imports to the United States of manufactured goods—including ​shoes, clothing, and automobiles—from countries in which workers receive lower wages. In​ addition, some U.S. firms have engaged in​ "offshoring" in which they move some operations—such as telephone helplines—to other countries where wages are lower. Which workers are most likely to lose their jobs to robots and​ offshoring? A. ​Middle-skilled workers whose jobs involve​ face-to-face contact. B. ​Low-skilled workers whose jobs involve​ face-to-face contact. C. ​Middle-skilled workers whose jobs do not involve​ face-to-face contact. Your answer is correct. D. ​Highly-skilled workers whose jobs do not involve​ face-to-face contact. It might be possible to distinguish between the effects of these different developments on the labor market by A. examining the evidence about offshoring that has occurred in other countries and comparing those trends to the trends in U.S. occupations. B. studying the types imported manufactured goods that have increased and their associated occupations. C. examining the evidence about robotic and technological job replacement on jobs that have been offshored and that support the manufacture of goods imported into the​ U.S., and comparing those trends to similar​ U.S.-based occupations. Your answer is correct. D. reviewing labor market trends that have occurred in other countries and comparing them to the trends in U.S. occupations.

​Middle-skilled workers whose jobs do not involve​ face-to-face contact. Highly skilled workers are likely to be more complementary to robotic technology. Middle skilled workers whose jobs do not involve​ face-to-face contact can sometimes be replaced by robots or by offshoring. Lower skilled workers often do service types of work that require​ face-to-face contact, making it harder to replace them with robots or offshoring. examining the evidence about robotic and technological job replacement on jobs that have been offshored and that support the manufacture of goods imported into the​ U.S., and comparing those trends to similar​ U.S.-based occupations. It might be possible to distinguish between the effects of these different developments on the labor market by examining the evidence about robotic and technological job replacement on jobs that have been​ offshored, and comparing those trends to occupations that have not been offshored.