ECON EXAM 3 - Module 11

A person's stock of skills to produce economic value is referred to as: A. human capital. B. fixed capital. C. personal capital. D. personal wealth.

A

A reason why a perfectly competitive firm's demand for labor curve slopes downward is that A. in the short run, as more labor is hired, labor's marginal product falls because of the law of diminishing returns. B. each additional unit of labor hired is less efficient than previously hired units. C. the firm's demand curve for the product that uses labor is downward sloping. D. the extra cost of hiring additional units of labor increases as a firm hires more units of labor.

A

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

A

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

A

Compensating differentials are A. higher wages that compensate workers for unpleasant aspects of a job. B. wages paid to workers where the supply of labor is great relative to demand. C. higher wages that compensate the more experienced workers in a field. D. non-monetary benefits from being employed, such as health-care benefits.

A

Firms use information on labor's marginal revenue product to determine A. how many workers to hire at each wage rate. B. how much marginal product to produce at each wage rate. C. how much labor services to supply at each wage rate. D. how much to produce at each output price.

A

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

A

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. a compensating differential. B. economic discrimination. C. a higher marginal revenue product. D. a negative feedback loop.

A

Marginal revenue product of labor for a competitive seller is A. equal to the marginal product of labor multiplied by the output price. B. the output price multiplied by the quantity sold. C. the change in total product from hiring one more worker. D. the marginal revenue of the product multiplied by the output price.

A

Other things remaining the same, which of the following is likely to cause a decrease in both the wage rate and the number of workers hired in a glass factory? A. The introduction of labor-saving technology in the factory B. A decrease in the population in the region where the factory is located C. The introduction of labor-complementary technology in the factory D. An increase in the population in the region where the factory is located

A

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? A. Technological advances such as cable television has increased the demand for sports entertainment. B. The supply of star athletes has decreased. C. The supply of star athletes has increased due to college athletic programs. D. The market power of athletes' unions has increased.

A

The most important factor contributing to wage differences in the labor market is differences in the level of education and training among workers. A. True B. False

A

The substitution effect of a wage increase is observed when A. leisure's higher opportunity cost causes workers to take less leisure and work more. B. the higher wage income causes workers to take more leisure and work more. C. leisure's higher opportunity cost causes workers to take more leisure and work less. D. the higher wage income causes workers to take more leisure and work less.

A

The typical labor supply curve is upward sloping but it is possible for the curve to be backward bending — negatively sloped — at very high wage levels. Which of the following would cause a backward-bending supply curve? A. This would occur when the income effect from an increase in the wage becomes larger than the substitution effect. B. This would occur when the substitution effect from an increase in the wage becomes larger than the income effect. C. This would occur when a large number of workers choose leisure rather than employment at low wages; only a very large increase in the wage will lead these workers to prefer employment to leisure. D. This would occur if leisure is an inferior good.

A

What is the difference between labor's marginal product and marginal revenue product? A. The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue. B. Labor's marginal product is a measure of labor's productivity while labor's marginal revenue product is a measure of labor's ability to sell the firm's products. C. The marginal revenue product of labor is the dollar value of hiring an additional worker while the marginal product of labor is the increase in the firm's physical output as a result of hiring an additional worker. D. The marginal product of labor is the increase in output as a result of hiring an additional worker while the marginal revenue product of labor is the increase in profit as a result of hiring an additional worker.

A

Which of the following explains why talented major league baseball players command much higher salaries than neurosurgeons? A. 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. B. because the total value of baseball games is much higher than the total value of neurosurgery C. because the supply of talented major league baseball players is relatively low compared to the supply of neurosurgeons. Therefore, major league baseball players exert far more market power than neurosurgeons. D. because it takes far more skill and training to be a major league baseball player than to be a neurosurgeon

A

Which of the following factors will not cause the labor demand curve to shift? A. the wage rate B. increases in human capital C. changes in technology D. a change in the price

A

Which of the following statements is true? A. The income effect and the substitution effect of a wage rate change work in opposite directions. B. The income effect and the substitution effect of a wage rate change work in the same direction. C. The slope of the labor supply curve depends only on the income effect of a wage rate change. D. The slope of the labor supply curve depends only on the substitution effect of a wage rate change.

A

An increase in the demand for orthodontic services leads to A. lower prices for orthodontic care. B. an increase in the demand for orthodontists. C. a rise in the rates of dental insurance. D. an increase in the supply of orthodontists.

B

An individual's labor supply curve shows A. the maximum wage rates offered to that individual by various potential employers. B. the relationship between wages and the quantity of labor that she is willing to supply. C. the relationship between wages and the quantity of labor that a firm is willing to employ. D. the relationship between the quantity of hours worked and total income earned by that individual.

B

Employers engaging in ________ try to enhance their profits. A. psychological bias B. statistical discrimination C. taste-based discrimination D. moral discrimination

B

In the legal sector, some practice areas have declined in recent years. For example, personal-injury and medical-malpractice cases have been undercut by state laws limiting class-action suits, out-of-state plaintiffs, and payouts on damages, and securities class-action litigation has declined in part because of a buoyant stock market. How does this affect the market for lawyers? A. The supply of lawyers shifts to the left. B. The demand for lawyers shifts to the left. C. The quantity of lawyers demanded decreases and this is represented by a movement along the demand curve. D. Both the demand and supply curves decrease.

B

Other things remaining the same, which of the following is likely to cause a left shift in the supply curve for labor? A. A decrease in the demand for the final product that the labor is used to produce B. A decrease in population C. An increase in the demand for the final product that the labor is used to produce D. An increase in population

B

Women typically earn less than men, even in the same occupation. Which of the following is an explanation for this discrepancy? A. Women are, on average, less motivated than men and therefore tend to avoid taking on more responsibilities. B. Women have, on average, less workforce experience than men of the same age. C. Women tend to take riskier jobs and earn compensating wage differentials. D. Women do not work as hard as men because of cultural influences.

B

A decrease in the wage rate causes A. a rightward shift of the firm's labor demand curve. B. a leftward shift of the firm's labor demand curve. C. an increase in the quantity of labor demanded. D. a decrease in labor's productivity.

C

An increase in a perfectly competitive firm's demand for labor could be caused by A. a decrease in the marginal product of workers. B. a decrease in the market wage rate. C. an increase in the market demand for the firm's product. D. an increase in the quantity of labor supplied.

C

At low wages, the labor supply curve for most people slopes upward because A. the supply of labor is perfectly inelastic at low wages. B. the demand for labor is perfectly elastic at low wages. C. as wages increase the opportunity cost of leisure increases. D. as wages increase income also increases unless hours worked decrease.

C

Discrimination that occurs when people's preferences cause them to discriminate against a certain group is referred to as: A. group discrimination. B. special interest group discrimination. C. taste-based discrimination. D. cultural discrimination.

C

A firm's demand for labor curve is also called its A. marginal factor cost of labor curve. B. marginal valuation curve. C. marginal benefit of labor curve. D. marginal revenue product of labor curve.

D

Compensating differentials are associated most closely with which of the following? A. economic discrimination B. differences in education C. comparable worth D. hazardous jobs

D

Customer discrimination occurs when A. workers refuse to serve customers of a different race. B. customers refuse to buy products they believe to be of poor quality. C. a firm pays workers different wages based on irrelevant factors. D. customers refuse to buy products produced by a racially diverse workforce.

D

If Alan Shaw reduces his work hours when his salary increases, then A. the income effect of his salary increase is completely offset by the substitution effect. B. leisure is an inferior good to Alan. C. the substitution effect of his salary increase dominates the income effect. D. the income effect of his salary increase dominates the substitution effect.

D

If Molly Bee increases her work hours when her wage increases, then A. Molly is spending beyond her means. B. the income effect of the wage increase outweighs the substitution effect. C. leisure is an inferior good to Molly. D. the substitution effect of the wage increase outweighs the income effect.

D

If an industry introduces a labor-saving technology in production, the demand curve for labor in that industry is likely to: A. become vertical. B. become horizontal. C. shift to the right. D. shift to the left.

D

In situations where new technologies are considered complementary to workers, demand for these workers will ________, resulting in ________ in the equilibrium wage. A. increase; a decrease B. decrease; a decrease C. decrease; an increase D. increase; an increase

D

Marginal revenue product for a perfectly competitive seller is equal to A. the marginal cost of production. B. the output price multiplied by the number workers hired. C. the output price multiplied by the total product of labor. D. the change in total revenue that results from hiring another worker.

D

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? A. differences in education B. differences in experience C. differing preferences for jobs D. geographic location

D

The dollar value of the marginal product of labor is the: Selected Answer: A. amount of output produced by the first unit of labor hired by a firm. B. extra output that is produced by hiring an additional unit of labor. C. value of the output produced by all the workers in a firm. D. contribution of an additional unit of labor to a firm's revenue.

D

Worker discrimination occurs when A. workers refuse to perform risky tasks. B. customers refuse to buy products produced by a racially diverse workforce. C. employers pay different employees different wages based on race. D. workers refuse to work with persons of a different race.

D

Suppose you have worked at a local sandwich shop for six months and now you plan to ask your manager for a raise. How can you convince your manager that you are worth more money than you are currently being paid? A. by threatening to quit if he refuses to give you a raise B. by demonstrating to your manager the marginal revenue product your employment contributes to the sandwich shop C. by explaining to him how difficult it is for you to save enough money to go to college D. by convincing him that you are a dedicated worker and ready to take on more responsibilities at the shop

B

Technological advancements that increase labor's productivity shift the labor supply curve to the right. A. True B. False

B

The decision rule for a profit-maximizing firm operating in a competitive market to hire an additional worker is the value of the: A. average product of the worker being hired should be lower than the wage rate. B. marginal product of the worker should be equal to or greater than the wage rate. C. average product of the worker being hired should be equal to the wage rate. D. marginal product of the worker should be equal to or lower than the wage rate.

B

The demand for labor depends primarily on the additional output produced as a result of hiring an additional worker and A. the number of workers willing to produce the additional output. B. the additional revenue received from selling the output produced as a result of hiring an additional worker. C. the elasticity of demand for the output produced by the worker. D. the payment made to the worker for producing the additional output.

B

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? A. Agents of movies stars are effective in obtaining large salaries for their clients today. Few movie stars had agents to negotiate for them in the 1930s and 1940s. B. 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. C. There was no actors' union in the 1930s and 1940s. The rise of strong actors' unions has caused salaries of movies stars to be greater today than in previous years. D. The studio system that dominated the industry in the 1930s and 1940s no longer exists. The studio system allowed movie studios to sign actors to long-term contracts that kept salaries down.

B

The firm's gain in profit from hiring another worker is A. the marginal revenue product of the extra worker. B. the difference between marginal revenue product and the wage of the worker. C. the reduction in costs from hiring another worker. D. the extra output of the extra worker.

B

The substitution effect of a wage decrease examines the effect of the decrease in wage income on a worker's ability to consume goods and services. A. True B. False

B

The wage rate is the opportunity cost of A. working. B. leisure. C. consumption. D. working overtime.

B

Which of the following correctly identifies a difference between taste-based discrimination and statistical discrimination? A. Employers engaging in statistical discrimination are willing to forego profit, whereas employers engaging in taste-based discrimination are trying to enhance profits. B. Employers engaging in taste-based discrimination are willing to forego profits, whereas employers engaging in statistical discrimination are trying to enhance profits. C. Taste-based discrimination is observed in the service sector, whereas statistical discrimination is observed in the manufacturing sector. D. Taste-based discrimination is observed in the manufacturing sector, whereas statistical discrimination is observed in the service sector.

B

Which of the following is a reason why it is difficult to estimate the extent of economic discrimination in the labor market? A. Ultimately, employers who discriminate cannot remain profitable. B. Differences in wages can be attributed to many other factors as well, such as differences in productivity and preferences. C. Employers who discriminate pay an economic penalty. D. Employers who discriminate are likely to do so in overt ways such as awarding some workers with benefits-in-kind.

B

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. A right shift in the demand curve for labor, without any change in the supply curve for labor B. A right shift in the supply curve for labor, without any change in the demand curve for labor C. A left shift in the demand curve for labor, without any change in the supply curve for labor D. A left shift in the supply curve for labor, without any change in the demand curve for labor

B

Which of the following is likely to lead to a left shift in the supply curve for labor to a firm? A. An increase in the opportunity cost of leisure B. The introduction of labor-saving technology C. The establishment of a new firm nearby that offers higher wages D. The introduction of labor-complementary technology

B

How will an increase in labor productivity affect equilibrium in the labor market? A. The demand for labor will decrease because fewer workers will be needed to produce the same output. The equilibrium wage and quantity of labor will decrease. B. The demand for jobs will increase and the equilibrium wage and quantity of labor will increase. C. The demand for labor will increase and the equilibrium wage and quantity of labor will increase. D. The supply of labor will increase and the equilibrium wage and quantity of labor will increase.

C

If the demand for labor is unchanged, an increase in the supply of labor will lead to A. a decrease in the quantity of labor demanded and an increase in the equilibrium wage. B. an increase in the quantity of labor demanded and an increase in the equilibrium wage. C. an increase in the quantity of labor demanded and a decrease in the equilibrium wage. D. a decrease in the quantity of labor demanded and a decrease in the equilibrium wage.

C

Let MP = marginal product, P = output price, and W = wage, then the equation that represents the condition where a competitive firm would hire another worker is A. P × W > MP. B. P × MP < W. C. P × MP > W. D. P × MP = W.

C

Other things remaining the same, which of the following is likely to happen if all homemakers in an economy start working as paid labor? A. There will be an increase in the wage rate in the country and a fall in the employment level. B. There will be a fall in both the wage rate and the employment level. C. There will be a fall in the wage rate in the country and an increase in the employment level. D. There will be an increase in both the wage rate and the employment level.

C

Painters who paint water towers earn higher wages relative to painters who paint houses because A. the demand for tower painters is greater than the demand for residential painters. B. the supply of water tower painters exceeds the supply of house painters. C. painting water towers is more risky than painting houses. D. the tower painters' union is probably more powerful than the house painters' union.

C

What happens to the equilibrium wage and quantity of labor if output price rises? A. The equilibrium wage falls and the equilibrium quantity of labor rises. B. The equilibrium wage rises and the equilibrium quantity of labor falls. C. The equilibrium wage and the equilibrium quantity of labor rise. D. The equilibrium wage and the equilibrium quantity of labor fall.

C

Which of the following correctly identifies the difference between the demand for labor and the demand for final goods? A. The demand for labor is fixed over time, whereas the demand for final goods changes according to changes in tastes and preferences. B. The demand for final goods is fixed over time, whereas the demand for labor changes according to the changes in tastes and preferences. C. 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. D. The demand for final goods is derived from the demand for labor, whereas the demand for labor is independent of the demand for final goods.

C

Which of the following is a likely reason for wage inequality between men and women? A. Men generally tend to have higher education qualifications than women. B. Men tend to spend more time out of the labor force as compared to women. C. Women tend to spend more time out of the labor force as compared to men. D. Women generally tend to have higher educational qualifications than men.

C

Which of the following statements is true? A. Employers are willing to forego profits when engaging in cultural discrimination. B. Employers are willing to forego profits when engaging in special interest group discrimination. C. Employers are willing to forego profits when engaging in taste-based discrimination. D. Employers are willing to forego profits when engaging in statistical discrimination.

C