Labor Market Homework

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Anthony owns a landscaping business that has 4 employees. His company is able to earn revenue of​ $600 per day. He knows that if he hires another​ worker, he would have to pay that worker​ $50 per day and the company would earn revenue of​ $680 per day if the new worker is hired. Determine the value of the marginal product of labor of the employee that Anthony is considering hiring.

$80

Which of the following is an example of what economists refer to as job​ search?

A. A person who applies for a​ high-paying job but does not​ qualify, so she begins searching for an appropriate position. B. People that engage in the job hunt by sending out resumes. C. An individual that engages in the job hunt by determining who is hiring and how much they pay (All of the Above)

Structural unemployment can be caused by​ ____________.

A. Efficiency wages B. collective bargaining rights of workers (Both A and B)

The losers when the minimum wage is ​$99 would be​ ___________. ​(Check all that apply​.)

A. firms that hire​ low-skill workers at the new wage. B. low-skill workers who now cannot find jobs due to increased competition for jobs. C. low-skill workers who lose their jobs due to a lack of demand for workers.

The value of marginal product of labor​ (VMPL) is​ ____________

A. given by the marginal product of labor times the price of the​ firm's output. C. the contribution of an additional worker to a​ firm's revenues. D. A and C only.

The period from 2007 to 2009 was a time of economic contraction that came to be known as the​ "Great Recession." During periods of​ recession, most firms experience a decline in demand for their​ product, as well as a decline in the​ product's equilibrium price. All other things being​ equal, macroeconomic theory predicts that the wage of most workers should decline in recessionary periods.​ However, this was not the case in the Great​ Recession, or during many other economic downturns throughout recent history. Based on the discussion in the​ chapter, explain why this might be​ so, and what the implications are for unemployment.

During downturns workers are resistant to the lowering of wages and firms try to avoid doing so. This downward wage rigidity keeps the quantity of labor supplied greater than​ demand, causing unemployment.

If​ wages, instead, face downward wage rigidity and remain at ​$6.50 per​ hour, what would be the change in employment caused by the shock to labor​ demand?

The labor market would move from E1 to E2, resulting in a decrease in employment of 3 thousand workers.

The graph on the right shows a labor market that is initially in equilibrium. The market then experiences a shock to labor demand. Suppose the market is initially in equilibrium at E1, where the labor supply curve intersects the​ "Old labor​ demand" curve. A shock to the market causes the labor demand curve to decrease to​ "New labor​ demand." If wages are completely flexible and can adjust freely and​ quickly, what would be the change in employment caused by the shock to labor​ demand?

The labor market would move from E1 to​ A, which would result in a decrease in employment of 1.5 thousand workers.

Which of the following is not true regarding the natural rate of​ unemployment?

The natural rate of unemployment is 0 percent when the U.S. economy is not in a recession.

A friend tells you that he thinks that the salespeople who work at Apple stores are paid very low​ wages, given their productivity. Dividing​ Apple's revenues by the total number of employees shows that each employee contributed an average of​ $473,000 in revenues in 2011. But most of​ Apple's sales staff are paid about​ $25,000 a year. What is the​ flaw, if​ any, in your​ friend's reasoning?

The wage is equal to the value of the​ worker's marginal​ product, not revenue per worker.

In a recent study for the National Bureau of Economic Research​ (NBER), four researchers looked at the effect of generous unemployment benefits on the local unemployment rate. They compared the unemployment situation in adjoining​ counties, which happened to lie in two different states that had different laws regarding the amount and duration of unemployment benefits.​ (Re-read the section on​ "A Natural Experiment of​ History" in Chapter 8 of the text to understand how the NBER research is based on a​ "natural experiment.") The authors of the NBER study found that the unemployment rate​ "rises dramatically in the border counties belonging to the states that expanded unemployment benefit​ duration" during the Great Recession. Why might this be​ so? Based on​ Hagedorn, Karahan, et​ al., "Unemployment Benefits and Unemployment in the Great​ Recession: The Role of Macro​ Effects." NBER working paper​ 19499, October 2013.

With the longer duration of unemployment​ benefits, firms needed to keep wages high to attract people to work. This caused downward wage​ rigidity, leading to persistent higher unemployment.

You accept a new job for a wage of​ $30,000 at a newspaper. You join the sales​ team, which consists of 10 people who try to sell online subscriptions. Each subscription sells for​ $200. When you talk to your​ boss, she says that you are the 11th​ worker, and that if you had not joined the​ team, she would have done okay with just 10 peoplelong dash—but ​"great to have​ you, we are more productive with you on​ board!" Assuming that the wage is determined by market​ forces, your boss must believe that your marginal product of labor is ___________ equal to ________ ​(Use the concept of the value of the marginal product of​ labor.)

any least 150

Which of the following factors does not cause a shift in the labor demand​ curve?

changes in the wage rate

The goal of a country with a healthy economy is to have​ ____________ equal to zero.

cyclical unemployment

Suppose the local pizza restaurant wants to hire another delivery driver to replace the worker who recently quit. The former worker could make 40 deliveries per week. The restaurant has received three applications from equally qualified workers. If it hires any one of these​ workers, it could boost deliveries by 30 deliveries per week. If each of these applicants is capable of boosting deliveries by 30 per​ week, what would happen to deliveries if the restaurant hired all three of the​ applicants?

deliveries would increase by less than 90 per week, since there will be diminishing marginal product of labor

When the​ firm's VMPL is plotted in a diagram with the quantity of labor measured along the horizontal​ axis, the resulting curve will be _______________ and constitutes the​ firm's ______________ .

downward sloping demand curve for labor

CyclicalCyclical unemployment is the unemployment that arises​ ____________.

during recessions when the unemployment rate is above the natural rate

What type of unemployment does job search lead​ to?

frictional unemployment

Frictional employment can result when ____________. (Check all that apply)

it takes time for firms to find applicants with the right skills and experience firms and workers have imperfect information about the state of the economy firms and workers have imperfect information about each other

The value of the marginal product of labor is the​ ____________.

market value of a worker's additional output for a firm

The impact of the minimum wage on the labor market as a whole is ______, since _________ of workers earn the minimum wage rate.

modest around 1 percent

The shock to labor demand has a more detrimental impact on employment when the wage rate is _______

rigid downward

Which of the following does not cause the labor supply curve to​ shift?

shifts in the labor demand curve that cause a change in the wage

According to the​ graph, when the minimum wage is set at ​$99 per​ hour, there will be​ ____________ unemployment of​ ____________ workers in this market.

structural; 4 million

Using the​ graph, we can see that if the minimum wage were set at ​$5 per​ hour, then​ ____________.'

there would be no structural unemployment due to wage​ rigidity, since the minimum wage is​ non-binding at ​$5 per hour.

In a competitive labor​ market, the​ profit-maximizing number of workers that a firm will hire occurs where the​ ____________.

value of marginal product of labor is equal to the market wage

A​ profit-maximizing firm will hire workers until the________ equals the ________. To hire beyond that would mean the firm would be paying the worker_______ than the worker's contribution to the firm.

value of the marginal product of labor (VMPL) wage more

Firms should hire workers until the​ ____________.

value of the marginal product of labor is at least as great as the wage paid

the labor demand curve shows the quantity of labor demanded will decrease as ___________. This results in a labor demand curve that is_____________.

wages increase downward-sloping

Which of the following best explains why the labor supply curve slopes​ upward?

when wages increase, the opportunity cost of not working increases, leading people to seek more work hours

Sometimes new technology in production reduces the time that a worker takes to complete a task. Technological innovations can also completely replace a factory worker. Does this mean that technological progress will lead to​ large-scale unemployment?

​No, some sectors may experience unemployment as a result of the innovations but overall productivity and incomes will​ increase, leading to more employment opportunities.


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