ECON315 Exam #1

For two substitutes in production, if the substitution effect dominates, a) then the inputs are gross substitutes b) then the inputs cannot be used at the same time c) then the inputs are gross complements d) then the inputs could be either gross complements or gross substitutes

a) then the inputs are gross substitutes

A worker's income is equal to his a) earnings b) earnings plus employee benefits plus unearned income c) wages plus benefits d) wage rate multiplied by hours worked

b) earnings plus employee benefits plus unearned income

If a firm hires another unit of labor, output goes up by 12 units. The wage rate for the unit of labor is $6. What is the firm's cost of producing another unit of output using labor? a) $1.50 b) $9 c) $.50 d) $18

c) $.50

Cross wage elasticities of demand are a) always positive in magnitude b) positive for gross complements, negative for gross substitutes c) either positive or negative in magnitude d) always negative in magnitude

c) either positive or negative in magnitude

If the quantity of auto workers demanded decreases from 66,000 to 54,000 when the equilibrium wage increases from $12.00 per hour to $14.00 per hour, then the own-wage elasticity of demand for these workers is a) inelastic b) neither elastic or inelastic c) elastic d) zero

c) elastic

Workers in an industry are probably underpaid if a) the workers could receive a higher salary in another occupation b) the workers cannot afford to quit their jobs c) employers have difficulty in hiring and retaining qualified workers d) firms in the industry are making a positive profit

c) employers have difficulty in hiring and retaining qualified workers

The short run own-wage labor demand elasticity a) includes both scale and substitution effect b) includes only part of the substitution effect c) includes only part of the scale effect d) includes all of the scale effect

c) includes only part of the scale effect

If a single small firm's demand for secretaries increases, then a) its wage rate will increase, and employment level will stay the same b) both its wage rate and its employment level will remain the same c) its wage rate will remain the same and its employment level will increase d) its wage rate will increase and its employment level will increase

c) its wage rate will remain the same and its employment level will increase

If labor is a small percentage of the total costs of an industry, this will tend to make the own-wage elasticity of labor demand a) high b) zero c) low d) positive

c) low

If two inputs are gross complements, the cross-wage elasticity of demand for the two inputs will be a) positive b) zero c) negative d) one

c) negative

If every worker wants ten dollars more per hours to work, then wages will a) go up by more than $10 b) go up by $10 c) go down as employment falls d) go up by less than $10

d) Go up by less than $10

If unions raise wages above their market clearing then... a) this will be Pareto efficient b) more workers will be able to get better jobs, increasing employment c) there will be a shortage of workers d) Persistently high rates of unemployment will result

d) Persistently high rates of unemployment will result

Own-wage elasticities of demand are a) either positive or negative b) positive for gross complements. negative for gross substitutes c) always positive d) always negative

d) always negative

When the price of capital increases, a firm will a) employ more labor because labor has become relatively cheaper b) employ the same amount of labor c) employ less labor due to the increase in costs d) employ more, less or the same amount of labor

d) employ more, less, or the same amount of labor

If every worker wants ten dollars more per hour to work, then wages will a) go up by more than $10 b) go up by $10 c) go down as employment falls d) go up by less than $10

d) go up by less than $10

Marginal Product of Labor tells us a) how much money the firm can make from hiring each employee b) which employee is the most competitive c) the average output produced by each employee d) the additional output produced by the last employee hired

d) the additional output produced by the last employee hired

The marginal product of labor tells us a) which employee is most productive b) how much money the firm can make from hiring each employee c) the average output produced by each employee d) the additional output produced by the last employee hired

d) the additional output produced by the last employee hired

Other things equal, which of the following will have the most elastic own-wage elasticity of demand? a) A steel firm with one plant in California b) All steel firms in California c) All steel firms in the US d) All steel firms in the World

a) A steel firm with one plant in California

Which of these persons is officially classified as being "not in the labor force"? a) Meredith, who would start looking for work if he thought he could get a good job b) Lexi, who has never worked but just started looking for work two weeks ago c) Derrick, who is working at a low wage job that does not challenge him d) Alex, who was fired from his job two months ago and is searching for a new job

a) Meredith, who would start looking for work if he thought he could get a good job

It has been said that teaching assistants to professors are underpaid. Which of the following would be evidence (if true) that they are underpaid? a) Professors have a hard time finding qualified teaching assistants b) Teaching assistants are made to work more than other workers in their job c) There is a surplus of teaching assistants d) Teaching assistants are paid far less than professors, even if they are doing similar work

a) Professors have a hard time finding qualified teaching assistants

Which of the following events will cause the labor demand curve to shift up and to the right? a) an increase in product demand b) a lower wage c) all of the above shift the labor demand curve up d) an increase in the supply of labor

a) an increase in product demand

When the price of capital increases, the quantity of ________ demanded will ________, but the effect on ________ is ambiguous a) capital; decrease; labor b) capital; increase; labor c) labor; decrease; capital d) labor; increase; capital

a) capital; decrease; labor

Moving from the upper to the lower portion of a straight labor demand curve, the elasticity a) changes from elastic to inelastic b) changes from inelastic or elastic c) could change from inelastic to elastic, or elastic to inelastic d) stays the same

a) changes from elastic to inelastic

The Labor Market does NOT a) Ensure all workers are hired b) coordinate employment decisions c) respond to price signals d) allocate workers to jobs

a) ensure all workers are hired

Other things equal, an elastic demand for an industry's output will tend to make the industry's own-wage elasticity of demand a) high b) positive c) zero d) low

a) high

Diminishing marginal returns occur because a) hiring more employees means that each has less capital with which to work b) the best employees will always be hired first. c) hiring more employees means that they will subdivide tasks and therefore become more d) it is more difficult to manage a firm as the size of the workforce and capital stock both grow.

a) hiring more employees means that each has less capital with which to work

Declining marginal product of labor a) is needed if the competitive firms are to stop hiring workers at some point b) allows firms to make the most profit c) implies workers get more productive as more of them are hired d) mainly exists because workers get tired after many hours of work

a) is needed if the competitive firms are to stop hiring workers at some point

If the firm operates in a competitive labor market, a) it faces a horizontal labor supply curve, and the marginal expense of labor equals the market wage b) it must compete against other employers by offering a generous compensation package c) it faces a positively sloped labor supply curve, and the marginal expense of labor is less than the market wage d) it faces a vertical labor supply curve, and it competes against other employers by moving to the lowest attainable point on the labor supply curve

a) it faces a horizontal labor supply curve, and the marginal expense of labor equals the market wage

If the hourly wage is $50 and the price of output is $25, then, in the short run, a) the firm should add workers if they add 2 or more units to output b) the firm should reduce employment until the wage falls to $25 c) the firm should hire two workers d) the firm should add workers if they add 1/2 or more units to output

a) the firm should add workers if they add 2 or more units to output

When deciding the salary of a sports star, a) the team must consider how much the sports star will cause revenues to increase b) the team estimates the sports star's marginal product; because this is a guess, sports stars are generally underpaid c) the team must consider how much money the sports star should earn d) the team will hire the sports star if doing so will increase the team's revenues

a) the team must consider how much the sports star will cause revenues to increase

In the long run, a profit-maximizing firm will select capital and labor so that a) the wage divided by the marginal product of labor equals the rental cost of a unit of capital divided by the marginal product of capital b) the wage equals the rental cost of a unit of capital c) the marginal product of labor equals the marginal product of capital d) labor equals capital

a) the wage divided by the marginal product of labor equals the rental cost of a unit of capital divided by the marginal product of capital

For two substitutes in production, if the scale effect dominates, a) then the inputs are gross complements b) then the inputs cannot be used at the same time c) then the inputs are gross substitutes d) then the inputs could be either gross complements or gross substitutes

a) then the inputs are gross complements

If Industry A can substitute capital for labor easily and Industry B cannot, then (other things equal) a) Industry B's own-wage elasticity of demand will be higher than Industry A's b) Industry A's own-wage elasticity of demand will be higher than Industry B's c) the industries' own-wage elasticities of demand will be equal d) we cannot predict which firm's own-wage elasticity of demand will be higher

b) Industry A's own-wage elasticity of demand will be higher than Industry B's

If the firm hires to a point where the marginal expense of labor is greater than the marginal revenue product of labor, then a) Profits are maximized b) Profits could be increased by reducing employment c) Profits could be increased by increasing employment d) Total cost must be greater than total revenue

b) Profits could be increased by reducing employment

Which of the following will cause a surplus of workers? a) an increase in the supply of workers b) a wage above the market clearing wage c) more workers wanting to work at higher wages d) a decrease in the demand for workers

b) a wage above the market clearing wage

The labor force is made up of a) employed workers, unemployed workers, and retired workers b) all members of society who are at least 16 years old and are either unemployed or unemployed c) all members of society d) all members of society who are at least 16 years of age

b) all members of society who are at least 16 years old and are either unemployed or unemployed

The own-wage elasticity of demand measures a) percentage change in wages divided by percentage change in quantity of labor demanded b) percentage change in quantity of labor demanded divided by percentage change in wages c) change in quantity of labor demanded divided by change in wages d) change in wages divided by change in quantity of labor demanded

b) percentage change in quantity of labor demanded divided by percentage change in wages.

If more people enter the labor market for architects, then a) the wage rate will increase and the employment level will decrease b) the wage rate will decrease and the employment level will increase c) both the wage rate and employment level will increase e) both the wage rate the employment level will decrease

b) the wage rate will decrease and the employment level will increase

An employer who is a monopolist in the product market, other things being equal, will probably a) Hire more employees than a perfect competitor would b) Hire fewer workers at a higher rate than a perfect competitor would c) Hire fewer employees than a perfect competitor would d) Hire the same number of employees as a perfect competitor, due to the competitiveness of the market

c) Hire fewer employees than a perfect competitor would

In the short run, a) employment levels cannot change b) wage rates and product prices cannot change c) a firm cannot add on to an assembly line or introduce new machines to the production process d) a firm cannot hire new workers

c) a firm cannot add on to an assembly line or introduce new machines to the production process

Own-wage elasticities of demand are a) always positive b) positive for gross complements c) always negative d) either positive or negative

c) always negative

Along a straight-line demand curve for labor a) demand becomes less elastic as the wage rises b) the elasticity of demand remains constant c) demand becomes more elastic as the wage rises d) the slope becomes more negative as the wage rises

c) demand becomes more elastic as the wage rises

Other things equal, the own-wage elasticity of demand for a category of labor is higher when a) the supply of other factors of production is highly inelastic b) the price elasticity of demand for the product being produced is low c) other factors of production can be easily substituted for the category of labor d) the cost of employing the category of labor is a small share of the total costs of production

c) other factors of production can be easily substituted for the category of labor

If skilled workers are gross complements with low-skilled immigrant labor, then, when there is an increase in low-skilled immigrant labor a) skilled workers wages will go up and employment will go down b) skilled workers wages will go down and their employment will go down c) skilled workers wages will go up and their employment will go up d) skilled workers wages will go down but their employment will go up

c) skilled workers wages will go up and their employment will go up

Economic rent is a) the value of a worker's labor services b) a worker's wage rate c) the amount by which a worker's wage exceeds his or her reservation wage d) the income a worker receives from his or her labor

c) the amount by which a worker's wage exceeds his or her reservation wage

If the price of a product decreases due to a decrease in demand, then a) the firm moves to the left along its labor demand curve b) the firm moves to the right along its labor demand curve c) the labor demand curve shifts to the left d) the labor demand curve shifts to the right

c) the labor demand curve shifts to the left

If two inputs are complements in production, a) then the inputs can be either gross complements or gross substitutes b) then the inputs cannot be used at the same time c) then the inputs are gross complements d) then the inputs are gross substitutes

c) then the inputs are gross complements

A competitive industry hires 1000 workers. The 1000th worker adds $500 a week to their employer's revenue. If a monopoly took over the industry, then the 1000th worker would likely a) uncertain; it depends on the shape of the demand curve for output b) still add $500 a week to their employer's revenue c) add more than $500 a week to their employer's revenue d) add less than $500 a week to their employer's revenue.

d) add less than $500 a week to their employer's revenue.

If two inputs are substitutes in production, and an increase in the price of one input shifts the demand curve for the other input to the left, then a) the scale effect is greater than the substitution effect, and the two are gross substitutes b) the scale effect is less than the substitution effect, and the two are gross substitutes. c) the scale effect is less than the substitution effect, and the two are gross complements d) the scale effect is greater than the substitution effect, and the two are gross complements

d) the scale effect is greater than the substitution effect, and the two are gross complements

Which of the following occurs if a firm pays workers more than the market wage? a) its application rate will be higher than usual b) It will have a surplus of labor c) Its quit rate will be lower than usual d) all of the above

D) all of the above

If the Salaries of accountants increase and other conditions remain the same then a) a firm will move to the left along its labor demand curve for accountants b) a firm will move to the right along its labor demand curve for accountants c) the labor demand curve for accountants will shift to the right d) the labor demand curve for accountants will shift to the left

A) a firm will move to the left along its labor demand curve for accountants

A worker's total compensation consists of a) Earnings plus in-kind benefits plus deferred benefits b) Wages c) Earnings d) Earnings plus in-kind benefits

A) earnings plus in-kind benefits plus deferred benefits