ch 11 econ quizzes

if the demand for labor is unchanged, population growth will increase the supply of labor and increase the equilibrium wage. Answers: True False

False

Which of the following would cause an increase in the equilibrium wage? Answers: The demand for labor increases faster than the supply of labor. The supply of labor increases and the demand for labor decreases. The supply of labor increases more than the demand for labor. The supply of jobs increases less than the demand for jobs.

The demand for labor increases faster than the supply of labor.

Which of the following is likely to lead to a left shift in the supply curve for labor to a firm? Answers: The introduction of labor-saving technology An increase in the opportunity cost of leisure The establishment of a new firm nearby that offers higher wages The introduction of labor-complementary technology

The establishment of a new firm nearby that offers higher wages

Women typically earn less than men, even in the same occupation. Which of the following is an explanation for this discrepancy? Answers: Women tend to take riskier jobs and earn compensating wage differentials. Women do not work as hard as men because of cultural influences. Women have, on average, less workforce experience than men of the same age. Women are, on average, less motivated than men and therefore tend to avoid taking on more responsibilities.

Women have, on average, less workforce experience than men of the same age.

An increase in the supply of capital, which is a complement to labor, will lead to Answers: an increase in the demand for labor. a decrease in the quantity of labor demanded. an increase in the quantity of labor demanded. a decrease in the demand for labor.

an increase in the demand for labor.

An increase in the demand for orthodontic services leads to Answers: lower prices for orthodontic care. a rise in the rates of dental insurance. an increase in the demand for orthodontists. an increase in the supply of orthodontists.

an increase in the demand for orthodontists.

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

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

income effect

an increase in wages makes us richer

Firms use information on labor's marginal revenue product to determine Answers: how much labor services to supply at each wage rate. how much marginal product to produce at each wage rate. how much to produce at each output price. how many workers to hire at each wage rate.

how many workers to hire at each wage rate.

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

human capital.

A reason why a perfectly competitive firm's demand for labor curve slopes downward is that Answers: the firm's demand curve for the product that uses labor is downward sloping. the extra cost of hiring additional units of labor increases as a firm hires more units of labor. each additional unit of labor hired is less efficient than previously hired units. in the short run, as more labor is hired, labor's marginal product falls because of the law of diminishing returns.

in the short run, as more labor is hired, labor's marginal product falls because of the law of diminishing returns.

Employers engaging in ________ try to enhance their profits. Answers: psychological bias taste-based discrimination moral discrimination statistical discrimination

statistical discrimination

The labor supply for an industry would decrease if Answers: t the percentage of the population from age 16 to 65 decreases. the wage rate falls. the government welcomes foreign workers into the country. a greater percentage of women want to work outside the home.

the percentage of the population from age 16 to 65 decreases.

An individual's labor supply curve shows Answers: the maximum wage rates offered to that individual by various potential employers. the relationship between the quantity of hours worked and total income earned by that individual. the relationship between wages and the quantity of labor that she is willing to supply. the relationship between wages and the quantity of labor that a firm is willing to employ.

the relationship between wages and the quantity of labor that she is willing to supply.

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

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

Which of the following is likely to cause a decrease in the wage rate and an increase in the employment level of a country? Answers: A right shift in the supply curve for labor, without any change in the demand curve for labor A left shift in the supply curve for labor, without any change in the demand curve for labor A left shift in the demand curve for labor, without any change in the supply curve for labor A right shift in the demand curve for labor, without any change in the supply curve for labor

A right shift in the supply curve for labor, without any change in the demand curve for labor

Which of the following is a reason why it is difficult to estimate the extent of economic discrimination in the labor market? Answers: Employers who discriminate are likely to do so in overt ways such as awarding some workers with benefits-in-kind. Employers who discriminate pay an economic penalty. Ultimately, employers who discriminate cannot remain profitable. Differences in wages can be attributed to many other factors as well, such as differences in productivity and preferences.

Differences in wages can be attributed to many other factors as well, such as differences in productivity and preferences.

Which of the following statements is true? Answers: Employers are willing to forego profits when engaging in taste-based discrimination. Employers are willing to forego profits when engaging in cultural discrimination. Employers are willing to forego profits when engaging in special interest group discrimination. Employers are willing to forego profits when engaging in statistical discrimination.

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

Which of the following correctly identifies a difference between taste-based discrimination and statistical discrimination? Answers: Taste-based discrimination is observed in the service sector, whereas statistical discrimination is observed in the manufacturing sector. Employers engaging in statistical discrimination are willing to forego profit, whereas employers engaging in taste-based discrimination are trying to enhance profits. Taste-based discrimination is observed in the manufacturing sector, whereas statistical discrimination is observed in the service sector. Employers engaging in taste-based discrimination are willing to forego profits, whereas employers engaging in statistical discrimination are trying to enhance profits.

Employers engaging in taste-based discrimination are willing to forego profits, whereas employers engaging in statistical discrimination are trying to enhance profits.

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? Answers: The supply of star athletes has decreased. The supply of star athletes has increased due to college athletic programs. The market power of athletes' unions has increased. Technological advances such as cable television has increased the demand for sports entertainment.

Technological advances such as cable television has increased the demand for sports entertainment.

How will an increase in labor productivity affect equilibrium in the labor market? Answers: The demand for labor will increase and the equilibrium wage and quantity of labor will increase. The demand for jobs will increase and the equilibrium wage and quantity of labor will increase. The supply of labor will increase and the equilibrium wage and quantity of labor will increase. 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.

The demand for labor will increase and the equilibrium wage and quantity of labor will increase.

In the legal sector, some practice areas have declined in recent years. For example, personal-injury and medical-malpractice cases have been undercut by state laws limiting class-action suits, out-of-state plaintiffs, and payouts on damages, and securities class-action litigation has declined in part because of a buoyant stock market. How does this affect the market for lawyers? Answers: The supply of lawyers shifts to the left. the demand for lawyers shifts to the left. The quantity of lawyers demanded decreases and this is represented by a movement along the demand curve. Both the demand and supply curves decrease.

The demand for lawyers shifts to the left.

Which of the following statements is true? Answers: The income effect and the substitution effect of a wage rate change work in opposite directions. The income effect and the substitution effect of a wage rate change work in the same direction. The slope of the labor supply curve depends only on the substitution effect of a wage rate change. The slope of the labor supply curve depends only on the income effect of a wage rate change.

The income effect and the substitution effect of a wage rate change work in opposite directions.

Other things remaining the same, which of the following is likely to cause a decrease in both the wage rate and the number of workers hired in a glass factory? Answers: A decrease in the population in the region where the factory is located An increase in the population in the region where the factory is located The introduction of labor-complementary technology in the factory The introduction of labor-saving technology in the factory

The introduction of labor-saving technology in the factory

What is the difference between labor's marginal product and marginal revenue product? Answers: The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue. Labor's marginal product is a measure of labor's productivity while labor's marginal revenue product is a measure of labor's ability to sell the firm's products. The marginal revenue product of labor is the dollar value of hiring an additional worker while the marginal product of labor is the increase in the firm's physical output as a result of hiring an additional worker. The marginal product of labor is the increase in output as a result of hiring an additional worker while the marginal revenue product of labor is the increase in profit as a result of hiring an additional worker.

The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue.

Other things remaining the same, which of the following is likely to happen if there is a decrease in the price of flour products? Selected Answer: Correct There will be a decrease in both the wage rate and the employment levels in the flour industry. Answers: There will be a decrease in both the wage rate and the employment levels in the flour industry. There will be an increase in both the wage rate and the employment levels in the flour industry. There will be an increase in the wage rate and a decrease in the employment levels in the flour industry. There will be a decrease in the wage rate and an increase in the employment levels in the flour industry.

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

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? Answers: This would occur if leisure is an inferior good. This would occur when the substitution effect from an increase in the wage becomes larger than the income effect. 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. This would occur when the income effect from an increase in the wage becomes larger than the substitution effect.

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

An increase in the price of grape juice causes an increase in the marginal revenue product of labor used to produce grape juice. True False

True

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

True

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

True

increases in population shift the market supply curve for labor to the right. True False

True

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? Answers: 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. Although the total value of garbage removal is greater than the total value of baseball, wages are determined by average values. There is greater competition in the garbage collection industry than there is in Major League Baseball. 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.

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.

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

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

Larry and Mike are equally skilled construction workers employed by the Brown and Root Company. Larry's job is riskier because he typically works on a scaffold 1,000 feet above ground. Larry's higher wage rate is the result of Answers: a higher marginal revenue product. a negative feedback loop. a compensating differential. economic discrimination.

a compensating differential.

As more output is produced, the marginal product of labor declines Answers: if the firm's output supply curve is inelastic. because of the law of diminishing returns. if firms reduce the wage paid to labor. because the firm's marginal revenue declines.

because of the law of diminishing returns.

Which of the following explains why talented major league baseball players command much higher salaries than neurosurgeons? Answers: because it takes far more skill and training to be a major league baseball player than to be a neurosurgeon because the total value of baseball games is much higher than the total value of neurosurgery because the supply of talented major league baseball players is low relative to its demand compared to the supply of neurosurgeons. Therefore, adding another player yields far greater marginal benefit than adding another neurosurgeon. because the supply of talented major league baseball players is relatively low compared to the supply of neurosurgeons. Therefore, major league baseball players exert far more market power than neurosurgeons.

because the supply of talented major league baseball players is low relative to its demand compared to the supply of neurosurgeons. Therefore, adding another player yields far greater marginal benefit than adding another neurosurgeon.

Suppose you have worked at a local sandwich shop for six months and now you plan to ask your manager for a raise. How can you convince your manager that you are worth more money than you are currently being paid? Answers: by explaining to him how difficult it is for you to save enough money to go to college by convincing him that you are a dedicated worker and ready to take on more responsibilities at the shop by demonstrating to your manager the marginal revenue product your employment contributes to the sandwich shop by threatening to quit if he refuses to give you a raise

by demonstrating to your manager the marginal revenue product your employment contributes to the sandwich shop

Customer discrimination occurs when Answers: customers refuse to buy products they believe to be of poor quality. a firm pays workers different wages based on irrelevant factors. customers refuse to buy products produced by a racially diverse workforce. workers refuse to serve customers of a different race.

customers refuse to buy products produced by a racially diverse workforce.

in situations where new technologies are considered substitutes for workers, demand for these workers will ________, resulting in ________ in the equilibrium wage. Answers: increase; a decrease decrease; an increase increase; an increase decrease; a decrease

decrease; a decrease

Marginal revenue product of labor for a competitive seller is equal to the marginal product of labor multiplied by the output price. the change in total product from hiring one more worker. the marginal revenue of the product multiplied by the output price. the output price multiplied by the quantity sold.

equal to the marginal product of labor multiplied by the output price.

Most economists believe that a small amount of the gap between the wages of white males and the wages of other groups is due to discrimination. Which of the following factors is not another factor that explains part of this gap? Answers: differences in education differing preferences for jobs differences in experience geographic location

geographic location

Compensating differentials are associated most closely with which of the following? Answers: hazardous jobs economic discrimination differences in education comparable worth

hazardous jobs

what does a backward bending supply curve entail?

higher wages is less labor supply

Compensating differentials are Answers: non-monetary benefits from being employed, such as health-care benefits. wages paid to workers where the supply of labor is great relative to demand. higher wages that compensate the more experienced workers in a field. higher wages that compensate workers for unpleasant aspects of a job.

higher wages that compensate workers for unpleasant aspects of a job.

The combined effect (both income and substitution) of a wage increase is that Answers: the substitution effect always dominates, leading to more work at a higher wage. 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. 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. the income effect always dominates, leading to less work at a higher wage.

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.

In situations where new technologies are considered complementary to workers, demand for these workers will ________, resulting in ________ in the equilibrium wage. Answers: increase; an increase increase; a decrease decrease; an increase decrease; a decrease

increase; an increase

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

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

The substitution effect of a wage increase is observed when Answers: leisure's higher opportunity cost causes workers to take less leisure and work more. leisure's higher opportunity cost causes workers to take more leisure and work less. the higher wage income causes workers to take more leisure and work more. the higher wage income causes workers to take more leisure and work less.

leisure's higher opportunity cost causes workers to take less leisure and work more.

The decision rule for a profit-maximizing firm operating in a competitive market to hire an additional worker is the value of the: Answers: marginal product of the worker should be equal to or lower than the wage rate. marginal product of the worker should be equal to or greater than the wage rate. average product of the worker being hired should be equal to the wage rate. average product of the worker being hired should be lower than the wage rate.

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

A firm's demand for labor curve is also called its Answers: marginal benefit of labor curve. marginal factor cost of labor curve. marginal valuation curve. marginal revenue product of labor curve.

marginal revenue product of labor curve.

Painters who paint water towers earn higher wages relative to painters who paint houses because painting water towers is more risky than painting houses. the demand for tower painters is greater than the demand for residential painters. the tower painters' union is probably more powerful than the house painters' union. the supply of water tower painters exceeds the supply of house painters.

painting water towers is more risky than painting houses.

If an industry introduces a labor-saving technology in production, the demand curve for labor in that industry is likely to: Answers: become vertical. shift to the right. become horizontal. shift to the left.

shift to the left.

when wages go up and leisure becomes more expensive

substitution effect

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

taste-based discrimination.

The demand for labor depends primarily on the additional output produced as a result of hiring an additional worker and Answers: the number of workers willing to produce the additional output. the additional revenue received from selling the output produced as a result of hiring an additional worker. the elasticity of demand for the output produced by the worker. the payment made to the worker for producing the additional output

the additional revenue received from selling the output produced as a result of hiring an additional worker.

he term "derived demand" refers to Answers: a demand curve that derives from the availability of resources. the demand for a factor of production that is derived from the demand for the good the factor produces. a firm's estimated demand curve derived from sales data. the demand for financial products called derivatives.

the demand for a factor of production that is derived from the demand for the good the factor produces.

The firm's gain in profit from hiring another worker is Answers: the extra output of the extra worker. the difference between marginal revenue product and the wage of the worker. the marginal revenue product of the extra worker. the reduction in costs from hiring another worker.

the difference between marginal revenue product and the wage of the worker.

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

the extra revenue the firm realizes from hiring that worker.

The income effect of a wage increase is observed when Answers: the higher wage income causes workers to take more leisure and work less. leisure's higher opportunity cost causes workers to take less leisure and work more. the higher wage income causes workers to take less leisure and work more. leisure's higher opportunity cost causes workers to take more leisure and work less.

the higher wage income causes workers to take more leisure and work less.

If Alan Shaw reduces his work hours when his salary increases, then Answers: the substitution effect of his salary increase dominates the income effect. the income effect of his salary increase is completely offset by the substitution effect. leisure is an inferior good to Alan. the income effect of his salary increase dominates the substitution effect.

the income effect of his salary increase dominates the substitution effect.

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

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

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

the wage rate

Worker discrimination occurs when Answers: customers refuse to buy products produced by a racially diverse workforce. workers refuse to perform risky tasks. workers refuse to work with persons of a different race. employers pay different employees different wages based on race.

workers refuse to work with persons of a different race.