ECON 202 Module 11 Quizzes

Which of the following most resembles a case of taste-based discrimination?

Austin has a deep-seeded hatred of bald-headed men and refuses to hire any to work at his car wash

Which of the following statements is true?

Employers are willing to forego profits when engaging in taste-based discrimination.

A wheat farmer sells wheat in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of wheat is $2 a bushel, the wage rate is $10, the farmer employs five workers and the marginal product of the fifth worker is 3 bushels. What would you advise this farmer to do?

Reduce employment because the wage paid is more than the marginal revenue product.

Some superstar athletes in the sports industry earn very high levels of income relative to other occupations, and over time the wage differential has been increasing. What could have caused this?

Technological advances such as cable television has increased the demand for sports entertainment.

Which of the following would cause an increase in the equilibrium wage?

The demand for labor increases faster than the supply of labor

How will an increase in labor productivity affect equilibrium in the labor market?

The demand for labor will increase and the equilibrium wage and quantity of labor will increase.

Increases in population shift the market supply curve for labor to the right.

True

Which of the following is true of the market for labor?

Workers are the suppliers of labor

Larry and Mike are equally skilled construction workers employed by the Brown and Root Company. Larry's job is riskier because he typically works on a scaffold 1,000 feet above ground. Larry's higher wage rate is the result of

a compensating differential

The opportunity cost of leisure is

a person's wage rate

An increase in the demand for orthodontic services leads to

an increase in the demand for orthodontists

Which of the following will lead to an outward shift in the firm's short-run demand for labor?

an increase in the price of output

Which of the following explains why talented major league baseball players command much higher salaries than neurosurgeons?

because the supply of talented major league baseball players is low relative to its demand compared to the supply of neurosurgeons. Therefore, adding another player yields far greater marginal benefit than adding another neurosurgeon.

Compensating differentials are associated most closely with which of the following?

hazardous jobs

If an industry introduces a labor-saving technology in production, the demand curve for labor in that industry is likely to:

shift to the left

Discrimination that occurs when someone assigns the properties of a group to a particular individual who is a member of that group is known as

statistical discrimination

If a firm offers higher starting salaries to Asian job candidates than to white job candidates because Asians as a group have higher SAT scores, this is an example of ________.

statistical discrimination

When expectations cause people to discriminate against a certain group, it is referred to as:

statistical discrimination

For many jobs, as wages increase, the quantity supplied of labor increases. This set of facts is evidence that the

substitution effect is larger than the income effect and the supply of labor curve is upward sloping.

The firm's gain in profit from hiring another worker is

the difference between marginal revenue product and the wage of the worker.

A firm's primary interest when it hires an additional worker is

the extra revenue the firm realizes from hiring that worker

If Alan Shaw reduces his work hours when his salary increases, then

the income effect of his salary increase dominates the substitution effect.

Applied to perfectly competitive labor markets, the marginal principle tells firms to hire workers until

the marginal revenue product of the last worker hired equals the wage

If the marginal productivity of labor decreases, then

the quantity of labor demanded at every possible wage rate will be less.

Which of the following is a likely reason for wage inequality between men and women?

women tend to spend more time out of the labor force than men

When 4 units of labor are employed, total product is 6 units; when 5 units of labor are employed, total product is 8 units of output. If the price of output is $5 per unit, what is the marginal revenue product of the 5th unit of labor?

$10

If a worker can produce 20 units of output which can be sold for $4 per unit, what is the maximum wage that firm should pay to hire this worker?

$80

Bonita's Braidworks hires workers to braid hair. The store sells the service for $25 per customer. The marginal revenue product of this store's fifth worker is $50. The marginal product of the fifth worker is

2 braided customers

Which of the following is likely to cause a decrease in the wage rate and an increase in the employment level of a country?

A right shift in the supply curve for labor, without any change in the demand curve for labor

Which of the following correctly identifies a difference between taste-based discrimination and statistical discrimination?

Employers engaging in taste-based discrimination are willing to forego profits, whereas employers engaging in statistical discrimination are trying to enhance profits.

Most economists believe that only a small gap between the wages of white males and the wages of other groups is due to education. Most of the gap is explained by discrimination.

False

Technological advancements that increase labor's productivity shift the labor supply curve to the right.

False

Beth is a college student looking for summer employment. She has two options. Firm X is employing lifeguards to patrol the beaches at an exclusive resort in Cancun, Mexico, while Firm Y offers her a job working in an office filing paper work and assisting with the ordering of office supplies. Given this information,

Firm X may pay a wage that is lower than that of Firm Y because the job at Firm X has more desirable working conditions.

You have been hired by the No Hassle Collection Agency to provide economic advice. The owner of the agency tells you that No Hassle's only variable input is the number of collection agents. The hourly wage for collection agents is $30.00. The marginal revenue product curve for collection agents reaches its maximum at five workers with a marginal revenue product of $34.00. What advice would you give this firm?

Hire collection agents until the marginal revenue product is equal to the wage — which will occur when more than five agents are employed.

A wheat farmer sells wheat in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of wheat is $2 a bushel, the wage rate is $10, the farmer employs five workers and the marginal product of the fifth worker is 10 bushels. What would you advise this farmer to do?

Increase employment because the wage paid is less than the marginal revenue product.

The difference between the salaries paid to movie stars and to actors who play supporting roles is much greater today than it was in the 1930s and 1940s. What factor explains this increase in relative salaries over time?

Technological advances in the entertainment industry increase the revenue that successful movies can earn. This has increased the movie studios' willingness to pay high salaries to movie stars.

Which of the following correctly identifies the difference between the demand for labor and the demand for final goods?

The demand for labor is derived from the demand for final goods, whereas the demand for final goods is independent of the demand for labor.

Consider the market for opticians. What is likely to happen to the equilibrium wage and quantity of opticians if more and more people turn to laser eye surgery instead of wearing glasses or contact lens?

The equilibrium wage and the equilibrium quantity of opticians fall.

Which of the following statements is true?

The income effect and the substitution effect of a wage rate change work in opposite directions.

If the supply of labor decreases, which of the following events will occur?

The wage rate will increase and firms will decrease employment to the point where MRP equals the new wage rate.

Other things remaining the same, which of the following is likely to happen if all homemakers in an economy start working as paid labor?

There will be a fall in the wage rate in the country and an increase in the employment level.

Assume that a comparable worth law is passed that determines that kindergarten teachers and bricklayers have comparable jobs; therefore, workers in both of these occupations should be paid the same wages. Assume that prior to the law, bricklayers were paid a higher wage than kindergarten teachers. Which of the following is the most likely result of the comparable worth law?

There will be a shortage in the market for bricklayers and a surplus in the market for kindergarten teachers.

An increase in the price of grape juice causes an increase in the marginal revenue product of labor used to produce grape juice.

True

An increase in the supply of capital, which is a substitute to labor, will lead to a decrease in the demand for labor.

True

An increase in wages raises the opportunity cost of leisure and leads to an increase in the quantity of labor supplied.

True

Higher wages that compensate workers for unpleasant aspects of a job are called compensating differentials.

True

An increase in a perfectly competitive firm's demand for labor could be caused by

an increase in the market demand for the firm's product.

A decrease in the wage rate causes

an increase in the quantity of labor demanded.

A government report that makes working in a particular industry less attractive to workers will most likely ________ the number of workers hired in that industry, and ________ the wage paid to those workers.

decrease; increase

Marginal revenue product of labor for a competitive seller is

equal to the marginal product of labor multiplied by the output price.

Most economists believe that a small amount of the gap between the wages of white males and the wages of other groups is due to discrimination. Which of the following factors is not another factor that explains part of this gap?

geographic location

Compensating differentials are

higher wages that compensate workers for unpleasant aspects of a job.

The combined effect (both income and substitution) of a wage increase is that

if the substitution effect outweighs the income effect, the labor supply curve slopes upward, but if the income effect outweighs the substitution effect, the labor supply curve is backward bending.

If the demand for hamburgers increases, it is likely that the demand for fast-food employees will

increase

An increase in the supply of musicians ________ the number of musicians employed, and ________ the wages paid to musicians

increases; decreases

Assume that as the wage rate rises a worker's substitution effect for leisure is larger than the income effect. We can conclude that in this region, the worker's:

labor supply curve will have the usual upward slope

Ajax Corporation has just decided to let managers work from home one day a week. This decision will make working conditions better and will

lead to an increase in the supply curve of labor for managers

Undesirable job features lead to a ________ labor ________.

lower; supply