ECON Ch. 13 HW & Quiz

The fact that many primary and secondary school teachers enjoy work schedules that coincide with their children's school schedules

implies that teachers will earn less than workers with similar qualifications in other jobs.

Food stamps and Medicaid are examples of

in-kind transfer programs.

Payments made to low-income families in the form of a good or service are

in-kind transfers.

The marginal product of labor decreases ______.

as firms hire additional workers in the short run

A means-tested benefit program is one in which the benefit level

declines as the recipient earns additional income.

Means-tested welfare programs typically _____ people's incentives to work.

decrease Reason: Because the benefit level decreases as recipients' earnings increase, means-tested programs reduce people's incentives to work.

In a winner-take-all labor market:

small differences in human capital translate into large differences in pay

The ______ effect leads people to consume less leisure as wages rise.

substitution

The ______ income , Incorrect Unavailable effect leads people to consume less leisure as wages rise.

substitution

Winner-take-all markets are likely to occur in situations in which:

technology allows the most talented individuals to serve broad markets

The marginal product of labor is

the additional output a firm gets by employing one additional unit of labor.

The level of income below which the government classifies a family as poor is called _____.

the poverty threshold

Kyle works for a perfectly competitive firm where he receives a wage rate of $15. From this, one can infer that

the value of Kyle's marginal product is at least $15.

The set of worker characteristics such as education, experience and work habits that affect the value of a worker's marginal product is referred to as a worker's:

human capital

As wages rise, the _____ effect will lead people to consume more leisure.

income

Leo is a welfare recipient who qualifies for two means-tested cash benefit programs. If he does not earn any income, he receives $225 from each program. For each dollar he earns (which his employer is required to report to the welfare agency), his benefit from each program is reduced by 75 cents until the benefit equals zero. If Leo values income and not the source of the income, then if he can only earn $400, he will choose to

not work and accept the benefits.

In 1996, the Personal Responsibility and Work Opportunity Reconciliation Act:

placed a five-year lifetime limit on welfare payments to any given recipient.

The union wage premium refers to the

amount by which union wages exceed nonunion wages.

If the demand for car mechanics falls, the equilibrium wage of car mechanics will tend to:

fall

Suppose the Fluffy Pillow Company produces pillows. The number of pillows it can produce each hour depends on the number of workers it hires, as shown in the accompanying table. In addition, each pillow can be sold for $2 more than the cost of the materials needed to produce it. What is the value of the marginal product of the 4th worker hired each hour?

$20

An in-kind transfer payment is

a benefit in the form of a good or service.

A labor union in a labor market is analogous to a(n) ______ in an output market.

cartel

A firm's value of marginal product of labor curve is its

labor demand curve.

A firm's labor demand curve is its

value of marginal product of labor curve.

The value of the marginal product of labor is the dollar value of the _____ output a firm gets by employing one additional unit of labor.

additional

Paper Pushers Incorporated hires workers in a competitive labor market. Apart from labor, the company has no other variable inputs. The company's hourly output varies with the number of workers hired, as shown in the accompanying table. If the market price of each page is $5, the first worker's VMPL is ______ per hour, and the third worker's VMPL is ______ per hour.

$200; $150

Leo is a welfare recipient who qualifies for two means-tested cash benefit programs. If he does not earn any income, he receives $225 from each program. For each dollar he earns (which his employer is required to report to the welfare agency), his benefit from each program is reduced by 75 cents until the benefit equals zero. If Leo earns $150, then he will receive ______ in total benefits from the two programs.

$225.

Sam owns a candy factory and hires workers in a competitive labor market to pack cases of candy. The company's weekly output of cases of candy varies with the number of workers hired, as shown in the accompanying table. If each case sells for $3 more than the cost of the materials used in producing it, then the most Sam would pay the fifth worker is ______ per week.

$360

Espresso Yourself Coffee Shop hires workers in a competitive labor market to make coffee. The ingredients required to make each cup of coffee cost 75 cents. The coffee shop's hourly output of coffee varies with the number of workers hired, as shown in the table. Each cup of coffee sells for $3.00. The value of marginal product of the first worker is ______ per hour.

$37.50

Leo is a welfare recipient who qualifies for two means-tested cash benefit programs. If he does not earn any income, he receives $225 from each program. For each dollar he earns (which his employer is required to report to the welfare agency), his benefit from each program is reduced by 75 cents until the benefit equals zero. If Leo only values income and not how the income was acquired, then he must earn ______ to be as well off as when he earns nothing and receives benefits.

$450

Gino's Pizza shop hires workers in a competitive market to make pizza. The ingredients required to make each pizza cost $5. Daily output at Gino's Pizza varies with the number of workers hired, as shown in the accompanying table. If pizzas sell for $8 each, what is the value marginal product for the fourth worker?

$48 per day

Suppose the Tasty Taco Company produces tacos. The number of tacos it can produce each hour depends on the number of workers it hires, as shown in the accompanying table. In addition, each taco can be sold for 50 cents more than the cost of the ingredients needed to produce it. What is the value of the marginal product of the fourth worker hired each hour?

$5

Espresso Yourself Coffee Shop hires workers in a competitive labor market to make coffee. The ingredients required to make each cup of coffee cost 50 cents. The coffee shop's hourly output of coffee varies with the number of workers hired, as shown in the accompanying table. Each cup of coffee sells for $2. The dollar value to the coffee shop of hiring the fifth worker is ______ per hour.

$7.50

Espresso Yourself Coffee Shop hires workers in a competitive labor market to make coffee. The ingredients required to make each cup of coffee cost 50 cents. The coffee shop's hourly output of coffee varies with the number of workers hired, as shown in the accompanying table. Each cup of coffee sells for $2.00. The dollar value to the coffee shop of hiring the fifth worker is ______ per hour.

$7.50

Sam owns a candy factory and hires workers in a competitive labor market to pack cases of candy. The company's weekly output of cases of candy varies with the number of workers hired, as shown in the accompanying table. If each case sells for $5 more than the cost of the materials used in producing it, then the value of marginal product of the second worker is ______ per week.

$750

Consider the accompanying figure representing the labor market below. Suppose the government passes a minimum wage requiring employers to pay at least $8.00 per hour. Prior to the imposition of the minimum wage, employer surplus is ______ per day, and after the imposition of the minimum wage, employer surplus is ______ per day.

$9,000; $1,000

Since 1980, the growth in real earnings has been the largest for the top:

1 percent of U.S. earners

According to the textbook, the union wage premium for workers with the same amount of human capital is about ______.

10 percent

Given the numbers in the table below, if the net price of each unit of output is $10, and the competitive market wage is $125 per week, then the firm should hire ______ workers.

2

Suppose the Tasty Taco Company produces tacos. The number of tacos it can produce each hour depends on the number of workers it hires, as shown in the accompanying table. In addition, each taco can be sold for 50 cents more than the cost of the ingredients needed to produce it. If the hourly wage for people who make tacos is $8, then how many workers should the Tasty Taco Company hire each hour?

2

Given the numbers in the table below, if the net price of each unit of output is $2, and the competitive market wage is $150 per week, then the firm should hire ______ workers.

3

Suppose the Fluffy Pillow Company produces pillows. The number of pillows it can produce each hour depends on the number of workers it hires, as shown in the accompanying table. In addition, each pillow can be sold for $2 more than the cost of the materials needed to produce it. If the hourly wage for people who make pillows is $26, then how many workers should the Fluffy Pillow Company hire each hour?

3

Suppose the MC Hammer Company produces hammers. The number of hammers it can produce each hour depends on the number of workers it hires, as shown in the accompanying table. In addition, each hammer can be sold for $2 more than the cost of the materials needed to produce it. If the hourly wage for people who make hammers is $17 per hour, then how many workers should the MC Hammer Company hire each hour?

3

Suppose that the accompanying graph describes the current labor market for high school teachers. Why might the supply curve in this market shift to the left?

More attractive employment opportunities become available in other professions.

Suppose Sarah has been offered a position as web designer at Firm A and Firm B. Both firms require their employees to work for 9 hours a day, but Firm A allows its employees to have a flexible work schedule, while Firm B requires its employees to be at work from 9 a.m. to 5 p.m. Otherwise, the jobs are identical. You would expect:

Sarah's wages to be lower at Firm A than at Firm B.

Elena is offered a job answering the phone in the State U economics department during lunchtime, from noon to 1 p.m., Tuesdays and Thursdays. Her reservation wage for this job is $15 per hour. If the department chair offers Elena $150 per week, will Elena accept this job?

Yes, accepting the job means a positive economic surplus for Elena.

According to the textbook, the best possible solution to the problem of poverty is

a combination of a negative income tax and public employment.

If demand for the product you make were to suddenly decline, you would expect the equilibrium price of the product to fall, which would lead to:

a decrease in the VMPL of each worker.

A labor union is:

a group of workers who bargain collectively with employers for better wages and working conditions

A system under which the government would grant every citizen a cash payment each year, financed by an additional tax on earned income is known as

a negative income tax.

An in-kind transfer is

a payment made in the form of a good or service.

One solution that could avoid the pitfalls in the EITC, the negative income tax, and public-sector employment, would be to ______. a. eliminate the minimum wage to stimulate growth b. increase the minimum wage to $15.00/hour c. use a combination of all three d.eliminate all but one option

c. use a combination of all three

As wages rise, the number of hours people choose to work:

could increase or decrease Reason: Whether people work more or fewer hours in response to a wage increase, depends on the magnitude of the income and substitution effect.

One concern economists have about the minimum wage is that it:

could lower employment

When a consumer is willing to pay more for a good or service because it is produced by a certain, favored group, it is called ______.

customer discrimination

As firms employ more labor in the short run, the value of the marginal product of labor _____.

decreases Reason: The law of diminishing returns tells us that as firms employ more labor, the marginal product of labor (and by extension the value of the marginal product of labor) will decrease.

In the short-run, as firms hire additional workers, the marginal product of labor

decreases.

The _____ effect leads people to consume more leisure as wages rise.

income

If the demand for nurses rises, this will tend to _____ the equilibrium wage of nurses.

increase

If the price of fruit increases, then the demand for fruit pickers will:

increase Reason: If the price of fruit increases, then the value of the marginal product of labor for fruit pickers will rise, leading the demand for fruit pickers to increase.

If the wages in a given occupation increase, you would generally expect the quantity of labor supplied in that occupation to _____. Multiple choice question.

increase Reason: Since wage differences among occupations influence occupational choice, the labor supply curve to a given occupation is thought to be upward sloping.

Paper Pushers Incorporated hires workers in a competitive labor market. Apart from labor, the company has no other variable inputs. The company's hourly output varies with the number of workers hired, as shown in the accompanying table. If the price of each page increases, then the demand for workers will

increase because the value of the marginal product of labor will increase.

The growth in income inequality in the United States since the early 1980s has been driven primarily by the dramatic

increase in real incomes for the top 1 percent of earners.

Suppose the elasticity of labor demand is less than 1 in absolute value. Imposing a minimum wage above the equilibrium wage will

increase the earnings of workers as a group.

Labor unions are thought to:

increase the wages of unionized workers but decrease overall economic efficiency

Assume that the accompanying graph describes the current labor market for nurses in a mid-sized city and that the labor market is perfectly competitive. If supply shifts from S0 to S1 and demand shifts from D0 to D1, then the equilibrium wage will ______, and the equilibrium number of nurses will ______.

increase; stay the same

In the short run, the value of the marginal product of labor decreases as the quantity of labor employed by a firm _____.

increases Reason: The law of diminishing returns tells us that as firms employ more labor, the marginal product of labor (and by extension the value of the marginal product of labor) will decrease.

If the value of the marginal product of an additional worker is $400 per week, then the firm should hire additional workers as long as the competitive market wage:

is less than $400 per week Reason: Firms should continue to hire additional workers as long as the value of the marginal product of labor is greater than the competitive market wage.

If Brian and Scott have identical jobs except that Brian has more flexible work hours, we would expect Brian to earn:

less than Scott. Reason: Since people generally prefer flexible work hours to fixed work hours, we would expect Brian to earn less than Scott.

Paper Pushers Incorporated hires workers in a competitive labor market. Apart from labor, the company has no other variable inputs. The company's hourly output varies with the number of workers hired, as shown in the accompanying table. The VMPL of the sixth worker is ______ than the VMPL of the fourth worker because ______.

less; of the law of diminishing returns

The earned-income tax credit (EITC) is a policy under which

low-income workers receive credits on their federal income tax.

Discriminatory employers who pay men more than women simply because they prefer working with men are likely to earn _____ employers who do not discriminate.

lower profits than

Kelly just graduated from State U and has three job offers: teaching at a prestigious private high school nine months a year with summers off, working 40 hours a week at a bank in a small city, and working more than 60 hours a week for a high-powered investment firm in New York. The annual salary for each of these offers is probably

lowest at the high school, in the middle at the bank, and highest at the investment firm.

The additional output a firm gets by employing one additional unit of labor is the

marginal product of labor.

The additional output a firm gets from hiring an additional unit of labor is the

marginal product of labor.

A welfare payment that is reduced when the recipient earns more income is a(n)

means-tested benefit.

If the benefits an individual receives from a welfare program decrease as their earnings increase, then the welfare program is

means-tested.

According to human capital theory, jobs that require more human capital will tend to pay ____ otherwise similar jobs.

more than

Government-sponsored jobs for low-income, unemployed individuals excels over EITC and negative income tax because ______.

- EITC does nothing for the unemployed poor - negative income tax can weaken work incentives

Select all that apply Select all that apply. A worker's human capital includes factors such as the worker's - education - motivation - intelligence - creativity

- education - motivation - intelligence - creativity

Select all that apply. Compensating wage differentials imply that, all else equal, workers are likely to be paid more if they: - face a high risk of injury on the job - work the night shift instead of the day shift - have the freedom to set their own work schedule

- face a high risk of injury on the job - work the night shift instead of the day shift

Criticisms of public employment for the poor include ______.

- people would have a tendency to leave private sector jobs in favor of public-sector jobs - such jobs would include "make-work" tasks and expand the government bureaucracy

Supporters of the Personal Responsibility Act conclude that ______.

- the program will encourage greater self-reliance over the long run - the program has reduced the nation's welfare rolls substantially

Suppose it is observed that the equilibrium wage and employment level have both risen in a competitive labor market. One can infer that the

demand for labor has increased.

If technological developments increase the marginal product of labor, then the

demand for labor will increase.

Suppose the owner of Secret Agent Jack's Rafting Expeditions will only hire a specific group of people as employees. This is called ______.

employer discrimination

Economic theory predicts that an increase in the minimum wage will lead:

employment to fall

In a competitive labor market, a worker's wage will be _____ the value of the marginal product of labor.

equal to

The general rule governing the hiring of workers is to

equate marginal labor costs to marginal labor benefits.

A negative income tax is a system under which the government would grant ______.

every citizen a cash payment each year, financed by an additional tax on earned income

A decrease in the price of beer will lead the number of workers employed in beer manufacturing to:

fall Reason: If the price of beer falls, then the value of the marginal product of labor for workers in beer manufacturing will fall, leading to a decrease in the number of workers hired.

If the price of cars increases, then car manufactures should:

hire more workers Reason: Since an increase in the price of cars will increase the value of the marginal product of labor, car manufacturers should hire more workers.

The earned income tax credit (or EITC)

gives low-income workers credits on their federal income taxes.

Firms should hire additional workers as long as the value of the marginal product of labor is _____ than the market wage.

greater

The degree of income inequality produced by competitive markets, in Professor Rawls' view, is

greater than the amount people would prefer.

Since 1980, real earnings for the top 1 percent of U.S. earners has:

grown rapidly

According to human capital theory, the higher is a worker's stock of human capital, the _____ will be the worker's wage.

higher

All else equal, nondiscriminatory employers who pay workers based on their ability rather than their race will earn _____ discriminatory employers.

higher profits than

Suppose that the accompanying graph describes the current labor market for high school teachers. Suppose supply of labor decreases. At the new equilibrium, wages would be ______ and ______ teachers would be hired.

higher; fewer

If the value of the marginal product of labor is greater than the market wage, the firm should

hire additional workers.

It is generally thought that the labor supply to any particular occupation:

is upward sloping Reason: Since wage differences among occupations influence occupational choice, the labor supply curve to a given occupation is thought to be upward sloping.

One way to prevent a mass exodus from private-sector jobs to the public sector would be to ______.

keep the public-employment jobs well-below minimum wage

A _______ (one word) is a group of workers who bargain collectively with employers for better wages and working conditions.

labor union

Suppose Ellen and Suzanne are both nurses at the same hospital. Their jobs are identical, but Ellen works the night shift and Suzanne works the day shift. We would expect Ellen to earn _____ Suzanne.

more than Reason: Since people generally prefer working the day shift to the night shift, we would expect Ellen to earn a positive compensating wage differential.

Ben and Ashley are identical in every way except for one: Ashley has a master's degree and Ben does not. You would expect Ashley to be paid

more than Ben.

Consumer discrimination exists when consumers are willing to pay ______ for a good or service produced by the favored group, even though the quality of the good or service is ______.

more; the same

Labor unions _____ the value of total output.

reduce Reason: As a result of the collective bargaining process, the value of the marginal product of labor will be higher in the unionized sector than in the nonunionized sector. Thus, total total output would be higher if workers moved out of the nonunionized sector and into the unionized sector.

Because the benefit level decreases as recipients' earnings increase, means-tested programs ______.

reduce people's incentives to work

A compensating wage differential is a difference in the wage rate that

reflects the attractiveness of a job.

Consider the accompanying figure representing the labor market. If a minimum wage of $12 per hour is imposed in this labor market, then worker surplus will ______ and employer surplus will ______.

rise; fall

The policy under which low-income workers receive credits on their federal income tax is

the earned-income tax credit (EITC).

A poverty threshold is ______.

the level of income below which the government classifies a family as poor

In professional baseball, some players earn over $20 million per year, while the average salary is about $4 million per year. The most likely explanation for this is that

the market for baseball players is a winner-take-all market.

If the competitive market wage is $600 per week, a firm should hire an additional worker as long as:

the value of the marginal product of an additional worker is greater than $600 per week Reason: Firms should continue to hire additional workers as long as the value of the marginal product of labor is greater than the competitive market wage.

In a competitive labor market, a worker's wage will be equal to

the value of the marginal product of labor.

Suppose that the accompanying graph describes the current labor market for high school teachers. If the wage is w*, then

there will be a shortage of certified teachers.

Kelly just graduated from State U and has three job offers: teaching at a prestigious private high school nine months a year with summers off, working 40 hours a week at a bank in a small city, and working more than 60 hours a week for a high-powered investment firm in New York. Suppose all of the jobs paid exactly the same annual salary, and that most people prefer leisure to work, all else equal. If that were the case

there would be a surplus of teachers at the high school.

The Personal Responsibility Act of 1996 ______.

transferred low-income cash assistance responsibilities to the states

The value of the additional output a firm gets by employing one additional unit of labor is the

value of the marginal product of labor.

A ______ labor market is one in which small differences in human capital translate into large differences in pay.

winner-take-all

When technology allows the most talented individuals to serve broad markets, the result is a(n) ______.

winner-take-all market

Elena is offered a job answering the phone in the State U economics department during lunchtime, from noon to 1 p.m., Tuesdays and Thursdays. Her reservation wage for this job is $15 per hour. Now suppose the department chair announces that the $150 per week earnings from the job will be divided equally among Elena and 299 other students in the department. How much economic surplus will Elena enjoy each week if she accepts the job?

−$29.50