Microeconomics: Ch. 10

More capital, advanced technology, more land resources, and improvements in the quality of labor account for:

higher productivity

Human capital refers to:

the personal stock of knowledge, know-how and skills that enables a person to be productive and to earn income

Derived demand for labor depends on:

the productivity of the labor used to create the good or service the demand for the product it produces

In order to maximize profit, a firm will hire labor in an amount at which:

the resource's marginal revenue product equals its marginal resource cost (MRP=MRC)

Other things equal, the demand for labor shows _____ between the wages of labor and the quantity of labor demanded.

an inverse relationship

The marginal product is the _______________ output that results from using one more additional unit of a variable input (ex. labor). (Use one word to answer.)

additional

The larger the proportion of total production costs accounted for by a labor:

the greater the elasticity of demand for labor

A(n) ______ union seeks to organize all available workers.

industrial

Which of the following may change the demand for labor?

Changes in the prices of other resources

True or false: In a purely competitive labor market, market supply and market demand establish the wage rate.

True

Which of the following is true?

An increase in the demand for a product will increase the demand for a resource used in its production, and vice versa

Which of the following is true?

An increase in the productivity of a resource will increase the demand for the resource and vice versa.

Which of the following exemplify the output effect of substitute resources?

Because of lower costs associated with a decline in the price of machinery, firms finds it profitable to produce and sell a greater output If in a firm, the price of machinery has fallen, the costs of producing various outputs must also decline A greater amount of output due to lower costs increases the demand for all resources, including labor

In a _____________ labor market, the level of employment would be greater and the wage rate would be higher than in a ______________ labor market.

Blank 1: competitive Blank 2: monopsonistic or monopsony

When unions employ the inclusive or industrial model to expand union membership and firms agree to union demands, the quantity of output, ______________ wages _______________ and a _________________ will occur if the firm attempts to offer a lower wage rate.

Blank 1: decreases Blank 2: increase Blank 3: strike

When the productivity of a product resource increases and makes a firm's product more efficient and or effective, it will ____________ (increase/decrease) the demand for the resource, and should the productivity of a resource decline, it will _________________ (increase/decrease) the demand for the resource.

Blank 1: increase Blank 2: decrease

When unions attempt to use the inclusive or industrial union model to grow membership, it has the effect of ___________________ the wage rate and making the supply of labor perfectly _______________.

Blank 1: increasing Blank 2: elastic

In the resource market, the output effect means that a firm will purchase __________ (more/less) of one particular input when the price of the other input falls and __________ (more/less) of that particular input when the price of the other input rises.

Blank 1: more Blank 2: less

Labor demand is said to be derived from ______________ demand and __________________ productivity.

Blank 1: product Blank 2: resource

The strength of the demand for labor resources will depend on the _____________ of the labor and the market ____________ of the good or service that the labor helps produce.

Blank 1: productivity Blank 2: price or value

A firm in a competitive labor market is a wage _______________ , meaning that for each additional unit of labor hired, total labor costs __________________ by exactly the amount of the constant market wage rate.

Blank 1: taker Blank 2: increases

Which of the following are union wage models?

Exclusive or Craft Union Model Inclusive or Industrial Model

True or false: A union that raises wage rates by attempting to gain control over a firm's total labor supply and threatens to withhold labor via a strike is exhibiting the exclusive or bilateral union model.

False

True or false: The demand for labor describes a positive relationship between the price of labor and the quantity of labor demanded.

False

True or false: To maximize profit, a firm should hire additional units of labor as long as each successive unit adds more to the firm's total cost than it adds to the firm's total revenue.

False

True or false: Unions can boost wage rates by reducing the demand for labor.

False

True or false: Wage differentials refers to hourly wage rates and annual salaries differing only among firms.

False

Which of the following are reasons for the high productivity of labor?

Greater amounts of capital Labor quality Advanced technology Larger amounts of land resources

Which of the following is a reason for the high productivity of labor?

Greater quantities of capital

What is the name of a schedule that shows the amounts of labor that buyers are willing and able to purchase at various price levels over some period of time?

Labor demand

______ is one of four reasons given why labor demand conditions differ in various markets.

Marginal revenue productivity

______ is one of the reasons given why the supply of labor differs in various labor markets.

Noncompeting groups

Which of the following describes the concept of elasticity of product demand?

Other things equal, the greater the price elasticity of product demand, the greater the elasticity of labor demand.

Which of the following describes the concept of elasticity of product demand?

Other things equal, the lower the price elasticity of product demand, the lower the elasticity of labor demand.

Which of the following best describes the ease of resource substitutability as a determinant of the elasticity of resource demand?

The greater the substitutability of other resources, the more elastic is the demand for labor

True or false: When a product is in high demand with customers based on its value (quality) or price, the demand for the resources to produce that product will be very high.

True

Which of the following best describes the ease of resource substitutability as a determinant of the elasticity of resource demand?

When there are few substitute resources, the more inelastic demand is for the resource currently being used

The MRP=MRC rule tells us that in pure competition:

a firm will hire workers up to the point at which the market wage rate (its MRC) is equal to its MRP

The percent change in labor quantity (divided) by the percent change in wage rate measures:

elasticity of labor demand

Which of the following refers to the higher wage rates that result from artificially restricting labor supply:

exclusive unionism

The _________ (greater/less) the level of productivity of labor, the greater the demand for that labor.

greater

When the productivity of labor is ______, the demand for highly productive labor is ______.

greater; greater

Access to greater amounts of land resources is a reason for the ______ productivity of labor.

high

When a union attempts to organize all available workers, this called a(n) ___________ union.

inclusive

The derived demand for an input will rise when:

it is highly productive in producing a highly valued commodity it is highly productive in reducing the costs to produce a product

The ______ ______ ______ is the amount that each additional unit of labor adds to the firm's total cost.

marginal resource cost

A firm in a purely competitive labor market

maximizes its profit by hiring workers to the point at which its wage rate equals MRP.

The demand for labor depends on its ____________

productivity

The determinants of the elasticity of labor demand are:

ratio of labor cost to total cost ease of resource substitutability elasticity of product demand

In a purely competitive market for labor, because each firm hires a ______ fraction of market supply, it cannot influence the market ______.

small; wage

When the relative cost of labor rises, a decision must be made whether to substitute and decrease the use of labor and increase the use of another resource input such as machines in order to produce the same amount of output at a lower cost. This statement describes the:

substitution effect

Advanced ____________ is a reason for the high productivity of labor.

technology

The ease of resource substitutability, the elasticity of product demand, and the ratio of labor cost to total cost are all factors that determine:

the wage elasticity of demand.

Craft unions have frequently forced employers to agree to hire only union members:

thereby gaining virtually complete control of the labor supply

When unions are successful in raising wages:

they also reduce employment in unionized firms

When a monopsonist attracts an additional worker

they will pay a higher wage to all workers

Compensating differences are:

wage differentials that must be paid to compensate for non-monetary differences in various jobs

On the supply side of the labor market:

workers are not homogeneous