E-201 Labor Markets

What is the market price of the final good? $5 $6 $8 $10

$10

The figure above shows a local lawn cutting service's demand for labor curve when the price of cutting an acre of lawn is $50 per acre. If the wage rate rises from $200 per day to $300 per day, the firm's demand for labor curve shifts leftward. shifts rightward. does not shift at all, but the firm moves upward along the curve. None of the above because this change shifts the supply of labor curve.

does not shift at all, but the firm moves upward along the curve.

The invisible hand of the marketplace acts to allocate resources efficiently but does not necessarily ensure that resources are allocated fairly. both fairly and efficiently. fairly but does not necessarily ensure that resources are allocated efficiently. neither fairly nor efficiently.

efficiently but does not necessarily ensure that resources are allocated fairly.

Assume W1 = $20 and W2 = $22 and the market is always in equilibrium. Then the shift of the labor demand curve from D1 to D2 increases the value of the marginal product of labor by $2. increases the value of the marginal product of labor by less than $2. decreases the value of the marginal product of labor by more than $2. does not change the value of the marginal product of labor.

increases the value of the marginal product of labor by $2.

The introduction of Medicare in 1965 created a sudden, and permanent increase in demand for doctors' services. As a result, in the labor market for doctors, this would lead to an increase in demand for doctors and thus increase the price of doctors' services. this would lead to an increase in the supply of doctors and reduce the price of doctors' services. this would lead to an increase in the quantity demanded of doctors and thus a movement down along the demand curve for doctors. there would be no changes as neither the demand nor the supply of doctors would change. the supply curve would shift leftward as doctors get overworked and some leave the profession.

this would lead to an increase in demand for doctors and thus increase the price of doctors' services.

If workers respond to an increase in the opportunity cost of leisure by taking less leisure, then their labor supply curve is horizontal. vertical. downward sloping. upward sloping.

upward sloping.

A competitive, profit-maximizing firm hires workers up to the point where the marginal product equals zero. marginal revenue product equals zero. marginal product equals the wage. value of the marginal product equals the wage.

value of the marginal product equals the wage.

The labor supply curve reflects how workers' decisions about the labor-leisure tradeoff respond to a change in the wage. workers' decisions about the opportunity cost of labor respond to a change in the quantity of labor supplied. firms' decisions about the labor-leisure tradeoff respond to the quantity of labor demanded. firms' decisions about how the quantity of labor they hire respond to changes in their opportunities to earn profits.

workers' decisions about the labor-leisure tradeoff respond to a change in the wage.

(i) Americans have been experiencing the greatest increase in income inequality among rich nations: ______ (ii) Health and social problems are less serious in the U.S. among OECD members: ______ (i) True, (ii) True (i) True, (ii) False (i) False, (ii) True (i) False, (ii) False

(i) True, (ii) False

What causes the labor demand curve to shift? (i) changes in productivity (ii) changes in wages (iii) changes in output prices (i) and (ii) (ii) and (iii) (i) and (iii) All of the above are correct.

(i) and (iii)

If the firm hires three workers, the three workers together produce 80 units. 100 units. 180 units. 240 units.

240 units.

The figure above shows a local lawn cutting service's demand for labor curve when the price of cutting an acre of lawn is $50 per acre. How much labor will the firm hire if the market wage is $300 per day? 4 workers 1 workers 2 workers 3 workers

3 workers

To maximize its profit, how many workers will the firm hire? 2 3 4 5

4

Sonny Car Wash is a perfectly competitive firm. The table above shows the firms total product schedule. If the price of a car wash is $10 and the wage rate is $80 per day, how many workers should Sonny Car wash employ to maximize its profit? Only 2 workers as the firm can make a profit of $290. 3 workers as it can make a profit of $360. 4 workers as the value of the marginal product of the 5th worher is less than the wage rate. 5 workers as the firm makes a profit of $400 Cannot determine this as the value of the marginal product is not given.

4 workers as the value of the marginal product of the 5th worker is less than the wage rate.

Which of the following events could decrease the demand for labor? An increase in the number of migrant workers An increase in the marginal productivity of workers A decrease in demand for the final product produced by labor A decrease in the supply of labor

A decrease in demand for the final product produced by labor

The shift of the labor demand curve from D1 to D2 could possibly be explained by technological progress. an increase in the price of firms' output. an increase in the supply of a relevant factor of production other than labor. All of the above are correct.

All of the above are correct.

Which of the following best illustrates the concept of "derived demand?" An increase in the wages of autoworkers will lead to an increase in the demand for robots in automobile factories. An automobile producer's decision to supply more cars will lead to an increase in the demand for automobile production workers. An automobile producer's decision to supply more minivans results from a decrease in the demand for station wagons. An increase in the price of gasoline will lead to an increase in the demand for small cars.

An automobile producer's decision to supply more cars will lead to an increase in the demand for automobile production workers.

Which of the following correctly describes a representative labor market? The wage adjusts to balance the supply and demand for labor. The wage equals the value of the marginal product of labor. An increase in the supply of labor increases the equilibrium wage. Both a and b are correct.

Both a and b are correct.

Aurora Custom Cabinets produces and sells custom kitchen cabinets. The firm has determined that if it hires 10 workers, it can produce 4 sets of cabinets per day. Alternatively, if it hires 11 workers, it can produce 4.2 sets of cabinets per day. It sells each set of cabinets for $2,000, and it pays each of its workers $200 per day. For the 11th worker, the value of the marginal product of labor is $500. For the 11th worker, the value of the marginal product of labor is $400. The firm is maximizing its profit. If the firm is employing 11 workers, then its profit would increase if it cut back to 10 workers.

For the 11th worker, the value of the marginal product of labor is $400.

When the relevant labor demand curve is D1 and the labor market is in equilibrium, (i) the value of the marginal product of labor to firms is less than W1. (ii) the opportunity cost of leisure to workers is greater than W1. (iii) the wage is W1. Only (i) and (ii) are correct. Only (i) and (iii) are correct. Only (ii) and (iii) are correct. All (i), (ii) and (iii) are correct.

Only (ii) and (iii) are correct.

Suppose that technological progress increases the productivity of teachers. Which of the following accurately describes the labor market for teachers after the technological change? Wages will rise and quantity of teachers employed will fall. Wages will rise and the quantity of teachers employed will rise. Wages will fall and the quantity of teachers employed will fall. Wages will fall and the quantity of teachers employed will rise.

Wages will rise and the quantity of teachers employed will rise.

Suppose that the labor market for low skill jobs in California is close to a competitive labor market. Many of low skill labor are from Mexico and Central America. Some politicians are considering restricting immigration from these countries. This would cause a decrease in the supply of labor leading to an increase in the equilibrium wage and an increase in the equilibrium quantity of labor employed. a decrease in the supply of labor leading to an increase in the equilibrium wage and a decrease in the equilibrium quantity of labor employed. a decrease in the demand of labor leading to a fall in the equilibrium wage and a decrease in the quantity of labor employed. the demand for labor to decrease far more than the supply of labor so that the equilibrium wage rate would decrease.

a decrease in the supply of labor leading to an increase in the equilibrium wage and a decrease in the equilibrium quantity of labor employed.

Which of the following would shift a market labor supply curve to the right? an increase in the price of output an increase in immigration a labor-saving technological change a decrease in the wage rate

an increase in immigration

"Squids for Kids" is a competitive firm that hires workers in a competitive labor market. In order to maximize profits such a firm will hire workers: as long as the VMPL is greater than the wage rate and will continue to hire until the VMPL equals the wage rate until the VMPL exceeds the wage rate by the greatest amount. where price is equal to marginal cost until it reaches the point where the MRPL is equal to the average product of labor, as the average product of labor is a maximum at that point

as long as the VMPL is greater than the wage rate and will continue to hire until the VMPL equals the wage rate

The value of the marginal product of any input is equal to the marginal product of that input multiplied by the additional revenue. additional revenue. change in total profit. market price of the output.

market price of the output.

When we examine historical data on income inequality in the U.S., we see that the distribution of income gradually became more equal between 1935 and 2018. more equal between 1935 and 1970s, but that trend reversed itself between 1980s and 2018. more unequal between 1935 and 1970s, but that trend reversed itself between 1980s and 2018. more unequal between 1935 and 2018.

more equal between 1935 and 1970s, but that trend reversed itself between 1980s and 2018.

Economic mobility refers to the government's attempt to distribute monetary assistance to areas most in need. ability of families to freely relocate to find good jobs. movement of people among income classes. movement of resources from one country to another.

movement of people among income classes.