Micro Ch. 13

Which of the following is not a reason why unionized firms can successfully compete with nonunionized firms?

Unionized firms are legally protected from price competition with nonunionized firms.

Taken together, factors such as education, training, experience, intelligence, and work habits are known as:

human capital.

Jobs in which there is a higher risk of injury or death will:

pay more than otherwise similar jobs.

The level of income below which the federal government classifies a family as poor is called the:

poverty threshold.

Consider the accompanying figure representing the labor market below. If a minimum wage of $12 per hour is imposed in this labor market, then:

200 workers will lose their jobs.

An in-kind transfer payment is:

a benefit in the form of a good or service.

The reason people in Professor Rawls' thought experiment would choose an equal distribution of income is that:

they fear ending up in a disadvantaged position themselves.

If the labor market for doctors is perfectly competitive, then an increase in the demand for doctors is likely to cause:

doctors' wages to increase.

Assume that the graph below 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

A firm is unlikely to hire a worker if:

the additional revenue generated by hiring the worker is less than his or her wage.

One reason nonunionized firms do not always drive unionized firms out of business is that:

unionized firms hire more selectively, employing workers with greater human capital.

Jen 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 Jen $150 per week, how much economic surplus will she enjoy as a result of accepting the job?

$120 per week

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 table. Each cup of coffee sells for $2.00. The most the coffee shop would be willing pay the third worker is ______ per hour.

$22.50

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 earns $150, then he will receive ______ in total benefits from the two programs.

$225.

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. In the absence of any earnings, Leo will receive ______ in cash from each program, for a total of ______ in benefits.

$225; $450

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 2nd worker hired each hour?

$36

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 table: If pizzas sell for $8 each, what is the value marginal product for the 4th worker?

$48 per day

Consider the accompanying figure representing the labor market below. In the absence of any government intervention, the equilibrium wage is ______ per hour, and the equilibrium employment level is ______ workers per hour.

$8; 400

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 following table: The marginal product of the fourth worker is _______ cases per week.

130

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 table: The marginal product of the 3rd worker is ______ pizzas per day.

18

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

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

Assume that the graph below describes the current labor market for nurses in a mid-sized city and that the labor market is perfectly competitive. Suppose that several years ago the supply of nurses in this city was S0. What might explain the change from S0 to S1?

Increased employment opportunities outside of nursing

Suppose that this 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

Jen 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 Jen $150 per week, will Jen accept this job?

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

Matt is offered a job driving the campus shuttle bus from 4 p.m. to 6 p.m. each Monday. His reservation wage for this job is $7 per hour. Suppose the campus transportation director offers Matt $50 per hour. Will Matt accept this job?

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

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

a combination of a negative income tax and public employment.

The union wage premium refers to the:

amount by which union wages exceed nonunion wages.

When the government transfers resources to the poor in the form of a good or service, it is called:

an in-kind transfer.

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

demand for labor will increase.

Consider the accompanying figure representing the labor markets shown below. If the government imposes a minimum wage above $6 per hour, then total earnings will ______.

fall

Assume that this graph illustrates a perfectly competitive labor market. If the supply of person-hours in this market shifts to the right, then the equilibrium wage will ______ and the equilibrium number of person-hours will ______.

fall; increase

According to John Rawls, if people had to choose an income distribution without any knowledge of their own talents and abilities, they would likely prefer an income distribution that:

gives everyone an equal share.

The earned income tax credit (or EITC):

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

In a perfectly competitive labor market, if the value of marginal product of the last worker hired is $20 and the wage rate is $25, then the firm should:

hire fewer workers.

Paper Pushers Inc. 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 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 value of a worker's marginal product of labor:

is higher for workers with more human capital.

A program under which the government gives all citizens a substantial lump sum payment that is financed by a tax earned income is termed a(n):

negative income tax.

Suppose males place less importance on the social approval of their job and more on the income they receive. The gender wage gap would therefore be ______ than if this difference did not exist because of ______.

larger; compensating wage differentials

Males major in engineering much more frequently than females. Starting salaries for engineers (male or female) are much higher than average. As a result, the observed gender wage gap for all college graduates will be ______ than the gender wage gaps in specific majors because ______.

larger; males and females choose different majors

Paper Pushers Inc. 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 table. The VMP of the sixth worker is ______ than the VMP of the fourth worker because ______.

less; of the law of diminishing returns

The value of marginal product of labor equals the

marginal product of labor times the net price for which each unit of output sells.

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

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

rise; fall

In the market for labor, the demand function describes

the number of workers a firm is willing to hire at each wage.

Suppose that this graph describes the current labor market for high school teachers: Given an initial wage of w*, then immediately following a decrease in supply:

there will be a shortage of high school teachers.

Assume that the average male wage rate is 20 percent higher than the average female wage rate. One can infer that:

this is evidence of discrimination only if all factors affecting productivity are equal.

For people with very low incomes, the Earned Income Tax Credit operates like a(n):

wage subsidy.

Assume that the graph below 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

wages will have to rise to $60 to avoid a nursing shortage.