Econ202 Module 11

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. True

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

A. True

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. True

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. True

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

A. Women tend to spend more time out of the labor force as compared to men.

An increase in technology that enhances labor productivity will likely result in: A. an increase in labor employment and an increase in the wage rate. B. employers using less labor and more capital while the wage effect is unknown. C. a decrease in labor employment and a decrease in the wage rate. D. an increase in labor employment and a decrease in the wage rate. E. a decrease in labor employment and an increase in the wage rate.

A. an increase in labor employment and an increase in the wage rate.

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

A. an increase in the quantity of labor demanded.

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

A. as wages increase the opportunity cost of leisure increases.

A decrease in demand for a product, holding other things constant, will A. decrease the marginal revenue product of labor. B. have an undetermined effect upon the marginal revenue product of labor. C. not change the marginal revenue product of labor. D. increase the marginal revenue product of labor.

A. decrease the marginal revenue product of labor.

If the price of labor increases, the typical perfectly competitive firm in the short run will A. hire less labor. B. hire the same labor and produce the same output. C. hire more labor. D. produce more output.

A. hire less labor.

If the demand for hamburgers increases, it is likely that the demand for fast-food employees will A. increase. B. stay the same. C. increase at first but then fall rapidly. D. decrease.

A. increase.

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 A. statistical discrimination. B. indirect discrimination. C. taste-based discrimination. D. justifying discrimination

A. statistical discrimination.

What is the law of diminishing returns?

Additional units of variable inputs provide less and less additional product in the short-run.

What is the income effect?

An increase in wages makes us richer, our purchasing power has gone up. Leisure is a normal good and we will buy more of it as our wages go up.

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

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

Other things remaining the same, which of the following is likely to happen if there is a decrease in the price of flour products? A. There will be a decrease in the wage rate and an increase in the employment levels in the flour industry. B. There will be a decrease in both the wage rate and the employment levels in the flour industry. C. There will be an increase in the wage rate and a decrease in the employment levels in the flour industry. D. There will be an increase in both the wage rate and the employment levels in the flour industry.

B. There will be a decrease in both the wage rate and the employment levels in the flour industry.

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

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

If the price of output increases, the labor ________ curve shifts to the ________. A. supply; left B. demand; right C. demand; left D. supply; right

B. demand; right

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

B. hazardous jobs

If the price of output increases, the equilibrium wage of workers who produce that output will ________ and ________ workers will be hired. A. decrease; more B. increase; more C. decrease; fewer D. increase; fewer

B. increase; more

An increase in the supply of musicians ________ the number of musicians employed, and ________ the wages paid to musicians. A. increases; increases B. increases; decreases C. decreases; increases D. decreases; decreases

B. increases; decreases

You observe that more labor is employed and the wage rate increases. This set of events could have been the result of a A. leftward shift of the labor demand curve. B. rightward shift of the labor demand curve. C. leftward shift of the labor supply curve. D. rightward shift of the labor supply curve.

B. rightward shift of the labor demand curve.

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

B. taste-based discrimination.

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

B. the change in total revenue that results from hiring another worker.

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 substitution effect from an increase in the wage becomes larger than the income effect. B. This would occur if leisure is an inferior good. C. This would occur when the income effect from an increase in the wage becomes larger than the substitution effect. D. 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.

C. This would occur when the income effect from an increase in the wage becomes larger than the substitution effect.

The opportunity cost of leisure is A. the substitution effect. B. the income effect. C. a person's wage rate. D. a person's income.

C. a person's wage rate.

The marginal product of labor is the: A. change in revenue resulting from adding an additional unit of labor. B. cost of additional labor necessary to produce an additional unit of output. C. change in output resulting from adding an additional unit of labor. D. change in labor necessary to produce an additional unit of output.

C. change in output resulting from adding an additional unit of labor.

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. average product of the worker being hired should be equal to the wage rate. C. marginal product of the worker should be equal to or greater than the wage rate. D. marginal product of the worker should be equal to or lower than the wage rate.

C. marginal product of the worker should be equal to or greater than the wage rate.

For many jobs, as wages increase, the quantity supplied of labor increases. This set of facts is evidence that the A. income effect is larger than the substitution effect and the supply of labor curve is upward sloping. B. substitution effect is larger than the income effect and the supply of labor curve is backward bending. C. substitution effect is larger than the income effect and the supply of labor curve is upward sloping. D. income effect is larger than the substitution effect and the supply of labor curve is backward bending.

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

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

C. the substitution effect of the wage increase outweighs the income effect.

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

C. the wage rate

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

A truck driver getting paid more than a school teacher is due to ________. A. discrimination in the job market B. glass ceiling in the job market C. differences in human capital D. compensating wage differentials

D. compensating wage differentials

A professional tennis player enters fewer tournaments each year as the prize money she won increased. This observation indicates that the tennis player A. is irrational. B. has shifted her labor supply curve rightward. C. has shifted her labor demand curve leftward. D. has a backward bending labor supply curve.

D. has a backward bending labor supply curve.

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

D. human capital.

Alejandro is a computer programmer employed by XYZ Tech Corp. He is Hispanic. He gets an offer from another company that is trying to lure him away from XYZ and is willing to pay him a higher salary than XYZ pays him. Alejandro asks his boss whether the company is willing to match the offer to keep him at XYZ. His boss says, "Don't let the door hit you on your way out." Why did the boss fail to match the other firm's offer? A. statistical discrimination B. compensating differential C. taste-based discrimination D. not clear why XYZ did not match the other firm's offer

D. not clear why XYZ did not match the other firm's offer

Suppose in Philadelphia the quantity of economists demanded is less than the quantity supplied by 2,000 economists. As a result, A. the labor supply curve for economists in Philadelphia is vertical. B. there is a shortage of economists in Philadelphia. C. there is equilibrium in this market. D. the labor demand curve for economists in Philadelphia shifts rightward. E. salaries for economists fall.

E. salaries for economists fall.

Who are the consumers of labor?

companies and businesses

The demand for a labor is a __________ demand.

derived

What is labor-complementary technology?

increases the demand for labor

What is taste-based discrimination?

motivated by bigotry and particular dislike towards a particular group

What is labor-saving technology?

reduced the demand for labor

What is statistical discrimination?

using information about a group to make conclusions about individuals

Marginal revenue product of labor equals ________.

wages

Who are the producers of labor?

workers

A firm's primary interest when it hires an additional worker is A. the extra revenue the firm realizes from hiring that worker. B. whether or not the new worker gets along with the firm's existing workers. C. the cost of hiring the additional worker. D. how the average output of the firm will be affected by this new worker.

A. the extra revenue the firm realizes from hiring that worker.

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 A. 0.5 braided customers. B. 2 braided customers. C. 25 braided customers. D. indeterminate from this information.

B. 2 braided customers.

If a pet grooming salon hires an additional groomer, that worker can groom 4 additional pets per day. The average grooming fee is $25. The most the salon would be willing to pay that groomer is A. $4 per day. B. $25 per day. C. $100 per day. D. indeterminate with the given information.

C. $100 per day.

Sarah is a high school graduate and James is a college graduate. Which of the following statements is true? A. Sara is likely to have more human capital than James. B. Both Sara and James are likely to have the same amount of human capital. C. Both Sara and James are likely to earn the same wage in the labor market. D. James is likely to have more human capital than Sara.

D. James is likely to have more human capital than Sara.

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 × MP < W. B. P × MP = W. C. P × W > MP. D. P × MP > W.

D. P × MP > W.

What is marginal profit?

(each workers marginal revenue product) - (each workers cost)

What is marginal revenue product of labor?

(price of the output) x (marginal product of labor)

What causes shifts in the labor supply curve?

1. changes in population 2. changes in alternatives

Why might the demand for labor change?

1. human capital 2. changes in technology 3. changes in price of the output good 4. change in the number of firms

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? A. Increase employment because the wage paid is less than the marginal revenue product. B. Do nothing because the wage rate and the marginal product of the last worker hired are equal. C. Reduce employment because the wage paid is less than the marginal revenue product. D. Reduce the product price so that the wage and marginal revenue product will be equal.

A. Increase employment because the wage paid is less 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? 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. Technological advances such as cable television has increased the demand for sports entertainment.

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

A. True

Which of the following will not cause the supply of labor curve to shift in the economics professor industry? A. Universities have discovered a way to make professors more productive. B. a decrease in the wage rate for Ph.D. economists in the banking industry C. University professors are going to be required to spend more time in their offices. D. a decrease in the number of courses a professor must teach

A. Universities have discovered a way to make professors more productive.

Which of the following most resembles a case of taste-based discrimination? A. Tatiana only hires men as bartenders and women as cocktail servers at her upscale bar. B. Austin has a deep-seated hatred of bald-headed men and refuses to hire any to work at his car wash. C. Katelyn prefers not to hire women under the age of 35 because she is afraid they will eventually want to take maternity leave. D. Rodrigo will only hire bilingual people because a majority of his customers speak either English or Spanish.

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

Which of the following is a reason why it is difficult to estimate the extent of economic discrimination in the labor market? A. Employers who discriminate are likely to do so in overt ways such as awarding some workers with benefits-in-kind. 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. 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.

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 paperwork and assisting with the ordering of office supplies. Given this information, A. Firm Y will pay a wage that is higher than that of Firm X because more individuals will apply for jobs at Firm Y. B. 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. C. Firm X may pay a wage that is higher than that of Firm Y because the work at Firm X is not very interesting. D. none of the above

B. 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.

A soybean farmer sells soybeans in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of soybeans is $6 a bushel, the wage rate is $30, the farmer employs eight workers and the marginal product of the eighth worker is 4 bushels. What would you advise this farmer to do? A. Reduce the product price so that the wage and marginal revenue product will be equal. B. Reduce employment because the wage paid is more than the marginal revenue product. C. Increase employment because the wage paid is less than the marginal revenue product. D. Do nothing because the wage rate and the marginal product of the last worker hired are equal.

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

The demand for labor is described as a derived demand because A. it is derived by producers seeking to make profits by starting new businesses. B. it is derived from the demand for products that use labor in the production process. C. it is derived by workers seeking to earn income to fund the consumption of goods and services. D. it is derived from government institutions that rely on labor markets for the purpose of raising tax revenue.

B. it is derived from the demand for products that use labor in the production process.

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 supply of labor 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 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.

The total value to society of having garbage removed is greater than the value of baseball games. Why, then, are baseball players paid more than garbage collectors? A. There is greater competition in the garbage collection industry than there is in Major League Baseball. B. Although the total value of garbage removal is greater than the total value of baseball, wages are determined by average values. C. Wages do not depend on total values but marginal values. The marginal revenue product of baseball players exceeds the marginal revenue product of garbage collectors. D. Garbage removal results in significant external benefits that are not captured in the price paid for garbage removal. As a result, wages of garbage collectors do not reflect their social benefits.

C. Wages do not depend on total values but marginal values. The marginal revenue product of baseball players exceeds the marginal revenue product of garbage collectors.

If the demand for labor decreases, then the equilibrium wage rate ________ and the equilibrium quantity of labor ________. A. falls; does not change B. might rise, fall, or not change; increases C. falls; decreases D. falls; increases E. rises; might increase, decrease, or not change

C. falls; decreases

Derived demand means A. labor demand is determined by the supply of labor. B. the labor demand curve will be upward sloping. C. labor demand is derived from demand for the product it produces. D. labor demand will shift about in a random fashion.

C. labor demand is derived from demand for the product it produces.

One reason why the average salary of Major League Baseball players is higher than the average salary of college professors is A. college professors accept lower salaries in exchange for better working conditions. B. competition among baseball club owners forces player salaries to be much higher than the players' marginal revenue products. C. the marginal revenue product of baseball players is greater than the marginal revenue product of college professors. D. the careers of most baseball players are much shorter than the careers of most college professors.

C. the marginal revenue product of baseball players is greater than the marginal revenue product of college professors.

If the equilibrium wage is below the actual wage: A. the demand for labor will increase. B. the demand for labor will decrease. C. the wage rate will fall. D. the wage rate will rise.

C. the wage rate will fall.

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? A. Increase employment because the wage paid is less than the marginal revenue product. B. Reduce the product price so that the wage and marginal revenue product will be equal. C. Do nothing because the wage rate and the marginal product of the last worker hired are equal. D. Reduce employment because the wage paid is more than the marginal revenue product.

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

The value of the marginal product of labor is the ________. 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. contribution of an additional unit of labor to a firm's revenue

The combined effect (both income and substitution) of a wage increase is that A. if the substitution effect outweighs the income effect, the labor supply curve is backward bending, but if the income effect outweighs the substitution effect, the labor supply curve slopes upward. B. the substitution effect always dominates, leading to more work at a higher wage. C. the income effect always dominates, leading to less work at a higher wage. D. 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.

D. 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.

When expectations cause people to discriminate against a certain group, it is referred to as ________. A. taste-based discrimination B. cultural discrimination C. preferential bias D. statistical discrimination

D. statistical discrimination

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. workers refuse to work with persons of a different race.

What is human capital?

something that makes a worker more productive (ex. education, on-the-job training)

What is the substitution effect?

tells us that when wages go up, leisure has become more expensive (opportunity cost goes up)

What is marginal product of labor?

the increase in the amount of output from an additional unit of labor