Ch 17 SB: Wage Determination

Plentiful capital; advanced technology; superior health, education and training of workers; and access to abundant natural resources account for ______ in advanced economies.

higher labor productivity

When the interests of firms and workers are not identical, it gives rise to ______.

the principal-agent problem

When a monopsonist pays a higher wage to attract an additional worker, it must pay that higher wage to ______.

all the workers it is currently employing at a lower wage

In some labor markets, workers ______ and sell their labor services collectively.

unionize or union

Where monopsony labor market outcomes might have occurred, ________ have sprung up to counteract that power by forcing firms to negotiate wages.

unions

How is the market labor demand curve for a particular labor service determined?

By summing the individual labor demand curves for every firm.

The total or market labor demand curve for a particular labor service is found by ______ the labor demand curves of all individual firms in the industry.

adding, summing, or totaling

When unions are successful in raising wages, they also ______.

reduce employment in unionized firms

Compensating differences is a reason why ______ conditions differ in various labor markets.

supply

On the ______ side of the labor market, workers are not homogeneous in their mental and physical capacities or in their education and training.

supply

When a firm hires most of the available supply of a certain type of labor, its decision to employ more or fewer workers ______.

affects the wage rate it pays to those workers.

Based on the supplied graph, wages in a bilateral monopoly will fall ______.

at an indeterminate point between Wm and Wu

The general, or _____ level of wages, like the general level of prices, includes a wide range of different wage rates.

average or mean

A _________ monopoly is a combination of the monopsony model and the inclusive or industrial unionism model.

bilateral

The ______ model is a combination of the monopsony model and the inclusive unionism model.

bilateral monopoly

A monopsony is a market in which ______ substantial buying (hiring) power.

a single firm has

The general or average level of wages, like the general level of prices, includes

a wide range of different wage rates.

The passage of which act established a federal minimum wage?

Fair Labor Standards Act

Supporters of a minimum wage argue that it can increase wage rates without causing significant unemployment in which type of labor market?

A low-pay labor market with monopsony power

Select all that apply Which of the following are among the reasons for the high productivity of labor?

Advanced technology Labor quality Access to abundant natural resources

Select all that apply Which of the following are criticisms of the minimum wage?

An above-equilibrium minimum wage will cause employers to hire fewer workers. It is poorly targeted to reduce household poverty.

______ is one of four reasons given why labor supply conditions differ in various labor markets.

Compensating differences

True or false: A union that raises wage rates by attempting to gain control over a firm's total labor supply and threatens to withhold labor via a strike is exhibiting the exclusive or bilateral union model.

False

True or false: Unions can boost wage rates by reducing the demand for labor.

False

True or false: Wage differentials refers to hourly wage rates and annual salaries differing only among firms.

False

Which of the following statements is agreed upon by all economists?

Firms will not hire workers who cost more per hour than the value of their hourly output.

Select all that apply Which of the following are the effects of a competitive labor market on employment levels and wage rates as compared to those of a monopsony labor market?

Higher wage rates Higher level of employment

Select all that apply Which of the following statements have been used to support the minimum wage?

In a low-pay labor market with some monopsony power, the minimum wage can increase wage rates without causing significant unemployment. A higher wage might prompt firms to find more productive tasks for low-paid workers, thus raising their productivity. A higher wage may reduce labor turnover, increasing the average productivity of firm's workers.

______ is a reason why demand conditions differ in various labor markets.

Marginal revenue productivity

______ is one of four reasons given why labor demand conditions differ in various markets.

Marginal revenue productivity

Which of the following occurs in a purely competitive labor market?

Numerous firms compete with one another to hire a specific type of labor.

Select all that apply What are ways in which workers differ on the supply side of the labor market?

Physical capacities Education and training Mental capacities

Select all that apply Which of the following groups are considered "labor" by economists?

Small-business owners Blue- and white-collar workers of all varieties Professional individuals, such as lawyers, physicians, dentists, and teachers

Which of the following union models attempts to increase the demand for union labor by raising demand for the products union members produce and or altering the prices of related inputs?

The demand-enhancement model

What determines the equilibrium wage rate and level of employment in a purely competitive labor market?

The intersection of the market labor demand curve and the market labor supply curve

Why are unions hesitant to demand excessive increases in wage rates?

The number of union workers employed falls as wages rise.

True or false: In the "demand enhancement model," a union attempts to increase the wage rate of its members either by increasing demand for the products the union helps to produce or by altering the prices paid for inputs.

True

True or false: When a monopsonist pays a higher wage to attract an additional worker it must then pay that new higher wage to all the workers it is currently employing as well.

True

Which of the following describes a strategy used by workers to avoid competing with one another in the labor market and instead to sell their services collectively?

Unionization

Which of the following statements best describes the effect of unions on monopsony labor markets?

Unions cause firms to negotiate wages.

When does a firm's decision to employ more or fewer workers affect the wage rate it pays those workers?

When the firm hires most of the available supply of a particular type of labor

In the graph shown, wages will fall somewhere between which two points for a bilateral monopoly?

Wm and Wu

Select all that apply Which of the following statements describe the principal-agent problem?

Workers may provide less than the agreed-upon effort. Workers may take unauthorized breaks. The interests of firms and workers are not identical.

Real hourly ______ is equal to wages and salaries plus employers' contributions to social insurance and private benefit plans.

compensation

Market imperfections are a reason why ______.

demand and supply conditions differ in various labor markets

The difference between the wage rate received by one group of workers and the wage rate received by another group of workers is called a wage ___________.

differential or difference

The point at which the market labor demand curve and the market labor supply curve intersect determines the ______ wage rate and level of labor ______ in a purely competitive labor market.

equilibrium; employed

True or false: Over recent decades, the U.S. labor force has shrunk slightly.

false

In a competitive labor market, the level of employment would be ______ and the wage rate would be ______ than in a monopsonistic labor market.

greater; higher

The U.S. labor force has ____ significantly over recent decades.

grown, expanded, increased, or risen

One of the criticisms of the minimum wage is that it is a poorly targeted measure for reducing ______.

household poverty

Market _______ is one of four reasons why demand and supply conditions differ in various labor markets.

imperfections

A union that raises wage rates by organizing all available workers and threatening to withhold labor via a strike is using the _____ 0 union model. (Enter only one word per blank.)

inclusive or industrial

When unions use the "craft union model" to increase the demand for union labor, they can _____ wage rates by _____ the supply of labor.

increase; reducing

When economists use the term ____ in its broadest sense, it applies to blue and white-collar workers, professional individuals such as lawyers, professors, and dentists, as well as small business owners.

labor

No current consensus exists on the employment or unemployment effects of the present level of the ______ wage.

minimum

Since the passage of the Fair Labor Standards Act in 1938, the US has had a federal _______ wage.

minimum

A labor market _______ (one word) is a situation in which a single employer has substantial buying (hiring) power.

monopsony or monopsonist

The supply curve for each type of labor slopes upward, which indicates that employers as a group must ______ to obtain more workers.

pay higher wage rates

Real hourly compensation is calculated as wages and salaries ______.

plus employers' contributions to social insurance and private benefit plans

In a(n) ______ labor market, many firms compete with one another to hire a specific type of labor.

purely competitive

On the ________ side of the labor market, workers are not homogeneous in their mental and physical capacities or in their education and training.

supply

The ______ curve for each type of labor slopes upward, indicating that employers as a group must pay higher wage rates to obtain more workers.

supply