Econ 310 final
A firm will obtain its profit-maximizing level of employment where A) marginal revenue product equals marginal wage cost. B) marginal revenue product equals value of marginal product. C) value of marginal product equals marginal wage cost. D) marginal product equals marginal revenue product.
A
All else equal, investment in education will be greater? A) the greater the earnings differential between more- and less-educated workers. B) the lower the expected retirement age. C) the greater the direct cost of education. D) the higher the interest rate.
A
Charley's employer is considering him for a general training program that will cost $3 per hour. His current marginal revenue product is $15 per hour and will rise to $20 upon completion of the program. Of the following, Charley's training and post training wage, respectively, will most likely be A) $12 and $20. B) $12 and $15. C) $15 and $20. D) $15 and $17.
A
Compared to the allocatively efficient amount, a monopsonist tends to hire A) too few workers because marginal wage cost exceeds the wage rate. B) too many workers because marginal wage cost exceeds the wage rate. C) too many workers because the value of marginal product exceeds marginal revenue product. D) too few workers because the value of marginal product exceeds marginal revenue product.
A
Compared to the basic work-leisure choice model, Becker's model of time allocation A) considers the household rather than the individual as the basic decision-making unit. B) considers time spent in household work as work time rather than leisure time. C) considers the week rather than the day as the basic unit of time. D) assumes that goods and services take no time to consume.
A
In industry A, all displaced workers remain in the union sector waiting to be recalled. In industry B, all displaced workers seek work in the nonunion sector. All else constant, the A) allocative efficiency loss is greater in industry A. B) allocative efficiency loss is greater in industry B. C) allocative efficiency loss is the same in industry A and industry B. D) dynamic efficiency loss is greater in industry A.
A
In the public sector, A) workers tend to receive more of their total compensation in the form of fringe benefits than their private sector counterparts. B) workers tend to receive less of their total compensation in the form of fringe benefits than their private sector counterparts. C) overall wage dispersion is much greater than in the private sector. D) quit rates are higher than in the private sector.
A
In the textile industry, industrial robots and assembly line workers are gross substitutes.Accordingly, the drop in the price of robots has A) decreased the demand for assembly line workers. B) increased assembly line workers' wages. C) decreased the demand for robots. D) increased the demand for assembly line workers
A
Independent of taxes raised to finance it, the provision of a public good most likely A) reduces labor supply because of the income effect. B) reduces labor supply because of the substitution effect. C) increases labor supply if the public good is a close substitute for goods consumers otherwise would have bought. D) has no impact on labor supply decisions.
A
Most of the variations in U.S. population growth have resulted from changes in A) birthrates and net migration. B) net migration and death rates. C) birthrates and technological change. D) birthrates and death rates.
A
Shanita is required by her employer to work a standard eight-hour workday. Suppose her marginal rate of substitution of leisure for income is less than the wage rate at this level of work effort. We can conclude that Shanita will A) feel underemployed. B) probably have a higher than average absenteeism rate. C) prefer to work part-time, if such a job is available at the same wage rate. D) feel over-employed.
A
Suppose an individual worker is on the up sloping portion of her labor supply curve.Then, for a wage increase, the A) substitution effect dominates the income effect. B) income and substitution effects both increase desired work hours. C) income effect dominates the substitution effect. D) income and substitution effects are equal
A
Suppose workers in labor market X are qualified to work in an alternative competitive labor market Y, and vice versa. An increase in the demand for labor in market Y will A) decrease labor supply in X and drive its wage up. B) have no impact at all in X. C) increase labor supply in X and drive its wage down. D) reduce labor supply in Y and drive its wage down.
A
The "monopoly union" model assumes that the union A) faces a wage-employment tradeoff, given as the firm's demand for labor curve. B) will be able to increase both the wages and employment of its members. C) will attempt to negotiate an "efficient contract" with the firm. D) attempts to maximise the wage rate
A
The concept of non-competing groups suggests that workers in different groups A) are imperfect substitutes for one another. B) have comparable characteristics but work for firms in different industries. C) are legally prevented from competing with one another. D) have identical stocks of human capital but differing preferences for non wage job characteristics
A
The labor force consists of all persons age 16 years and over who are A) employed or are actively seeking employment. B) not institutionalised. C) employed, actively seeking employment, or have given up looking for employment. D) employed.
A
The long-run response to a drop in the wage exceeds the short-run response for all of the following reasons except A) it is more difficult to substitute capital for labor in the long run than the short run. B) an increase in labor makes capital more productive, leading to more capital and therefore higher labor productivity. C) the demand for the firm's output is more elastic in the long run. D) technology may change in the long run.
A
The public provision of a good that is a substitute for a private good will A) likely decrease labor demand in the private sector. B) likely increase labor demand in the private sector. C) necessarily reduce wage rates of government workers. D) necessarily reduce work effort
A
Which of the following best describes the "law of diminishing marginal returns"? A) As more labor is added to a fixed stock of capital, labor's marginal product must eventually fall. B) Output per worker must eventually fall. C) As more labor is added to a fixed stock of capital, total output must eventually fall. D) The marginal product of labor is negative.
A
Which of the following isnot predicted by the hedonic theory of wages, all else constant? A) Firms that pay lower wages but offer more amenities have higher than average profits. B) Jobs that offer high levels of safety will pay less than those in which working conditions are less safe. C) Workers that have strong preferences for particular non-wage amenities will be matched with firms that can provide them most cheaply. D) Firms will tend to offer those non-wage amenities that they can provide most cheaply.
A
Which one of the following is generally not associated with relatively high levels of unionisation? A) services B) public administration C) African Americans D) blue-collar workers
A
Which one of the following union lobbying activities, if successful, would increase the demand for union labor? Lobbying for legislation that A) raises the price of a substitute resource. B) raises the price of a product or service complementary to that produced by the union. C) repeals the Davis-Bacon Act. D) raises the price of a complementary resource.
A
A firm can hire 20 workers for $10 per hour, but finds it must raise the wage to $11 to attract another worker. If it must pay all its workers the same wage, the marginal wage cost of the 21st worker is A) $21. B) $31. C) $10. D) $11.
B
A monopsonist's marginal wage cost curve is positively sloped because A) it must charge a lower price for each additional unit of output, and it must charge this lower price for all units sold. B) it must pay a higher wage to attract additional workers, and it must pay this higher wage to all workers. C) it "discriminates" by paying each worker a different wage according to his or her opportunity cost. D) it pays its workers lower wages, so that the supply of labor to the market is restricted.
B
An earnings-maximizing student would attend college if A) the net present value of a college education is zero. B) the internal rate of return on a college education exceeds the interest rate on borrowed funds. C) the internal rate of return on a college education is positive. D) there is an earnings gain associated with a college education.
B
An example of a sociological immobility is A) craft unions limit the access of nonunion workers to apprenticeship positions. B) the so-called "glass ceiling" (a form of discrimination) prevents women from moving into certain high-paying managerial jobs. C) state governments require workers in many jobs to obtain a license. D) ties to family and friends prevent workers from moving to a region with relatively high wages
B
Compared to an otherwise identical competitive firm, a firm with monopoly power will hire A) more workers, because monopolies have higher profits and can pay higher wages. B) fewer workers, reflecting its decision to produce less output. C) fewer workers, because workers are less productive in a monopoly setting. D) more workers, because the higher price charged by the monopoly raises its MRP
B
Consider the effects of a government transfer payment that falls as income rises (such as food stamps). Economic theory predicts that A) work effort falls because the substitution effect outweighs the income effect. B) both the income and substitution effects tend to reduce work effort. C) work effort rises because the substitution effect outweighs the income effect. D) work effort falls because the income and substitution effects offset each other.
B
Evidence suggests that unions reduce firm profitability and discourage investment, so that A) the dynamic efficiency loss from unionisation is smaller than the static efficiency loss. B) the dynamic efficiency loss from unionisation is greater than the static efficiency loss. C) turnover in union firms is greater because workers become bored with old technology. D) turnover in nonunion firms is greater because workers cannot keep up with new technology.
B
For a firm selling output in an imperfectly competitive market, its labor demand curve will A) be perfectly elastic if the firm is hiring labor competitively. B) decline because of diminishing marginal productivity and because product price declines as output increases. C) reflect the value of marginal product schedule, provided the firm is operating in the zone of production. D) decline solely because of diminishing marginal productivity
B
If capital and labor are gross complements, an increase in the cost of capital will A) either increase or decrease the demand for labor depending on whether the substitution effect or the output effect is stronger. B) decrease the demand for labor and drive the wage down. C) increase the demand for labor and drive the wage up. D) increase the supply of labor and drive the wage down
B
If education is undertaken as consumption as well as investment, A) researchers will overstate the social rate of return on human capital investment. B) researchers will understate the private rate of return on human capital investment. C) the investment costs of education will be understated. D) the benefits of education will be overstated
B
In Becker's model of time allocation, the difference between "goods" and "commodities"is that commodities are produced A) in markets, whereas goods are produced in households. B) by combining goods with time. C) in the market, whereas goods are produced in the home. D) only with housework
B
In the context of the basic work-leisure model, "leisure" time includes A) only time devoted to rest and relaxation. B) any time not devoted to a paying job. C) any time not devoted to either a paying job or household work. D) any time devoted to anything desirable.
B
Indifference curves are convex to the origin because A) the marginal rate of substitution of leisure for income is negative. B) at a lower income, a person is less willing to sacrifice income for additional leisure. C) at a lower income, a person is more willing to sacrifice income for additional leisure. D) at any income level, a person is willing to sacrifice the same amount of income for additional leisure.
B
Lower-paid workers often seem to have less-desirable working conditions as well because A) employers discriminate against unskilled workers. B) the compensating differential for skill often outweighs the compensating differential for poor working conditions. C) the compensating differential for poor working conditions often outweighs the compensating differential for skill. D) lower-paid workers tend to have proportionately greater fringe benefits
B
On a standard income-leisure diagram, Sara has steeper indifference curves than John.This likely reflects the fact that A) John values leisure more highly compared to income than Sara does. B) Sara values leisure more highly compared to income than John does. C) Sara likes income but dislikes leisure, while John likes both. D) Sara likes leisure but dislikes income, while John likes both.
B
Since 1950, government employment has grown A) more quickly at the federal level than the state and local level. B) more quickly at the state and local level than the federal level. C) as quickly at the federal level as the state and local level. D) at the same rate as total U.S. employment.
B
Suppose a tax is levied on Muhammad which reduces his real income. The money collected is used to provide a public good which restores his utility to exactly the same level it had been prior to the tax. Compared to his original work effort, Muhammad will now work A) more hours because the substitution and income effects reinforce one another. B) fewer hours because the income effect of the public good exactly offsets the income effect of the tax, leaving only the substitution effect of the lower net wage. C) more hours because the income effect of the public good exactly offsets the income effect of the tax, leaving only the substitution effect of the lower net wage. D) either more or fewer hours, depending on the relative strengths of the income and substitution effects.
B
Suppose income tax rates are reduced. As a result, Smith works more hours per week while Jones works fewer hours per week. We can conclude that A) Smith and Jones are in different tax brackets. B) for Smith, the substitution effect exceeds the income effect; the opposite is true forJones. C) for Jones, the substitution effect exceeds the income effect; the opposite is true forSmith. D) Jones conforms to the economic model of labor supply but Smith does not.
B
The income effect is A) the combination of leisure and wage rate that maximizes one's income. B) the part of the total change in desired work hours that is due to the change in real income resulting from a change in the wage rate. C) always dominated by the substitution effect. D) the part of the total change in desired work hours that is due to a change in the wagerate, with real income or utility constant
B
The wage rate paid workers at Flow, Inc. will most likely exceed that at otherwise identical Stock Co. if A) the demand for labor at Stock Co. exceeds the demand for labor at Flow, Inc. B) Stock Co. offers better pension and insurance benefits than Flow, Inc. C) earnings are subject to greater variability at Stock Co. D) Flow, Inc. is a more prestigious firm than Stock Co.
B
Which of the following actions might a union use to try to restrict the growth of labor supply? A) increase product demand B) reduce the number of qualified workers C) enhance worker productivity D) reduce the wage for nonunion labor
B
Which of the following best describes the impact of government transfers on human capital investment decisions? A) In-kind transfers reduce the incentive to invest in human capital, while cash transfers increase it. B) Some transfers reduce the incentive to invest in human capital because higher wages are accompanied by loss of benefits; other transfers increase investment by reducing the cost of investing. C) Transfers have a negative impact on short-run investment decisions but no impact on long-run investment decisions. D) Transfers have no impact on human capital investment decisions.
B
Which of the following circumstances will increase the likelihood of an individual being a nonparticipant in the labor market? A) a potential market wage that exceeds the individual's reservation wage B) availability of substantial nonwage income C) high earnings capacity in the labor market D) the absence of nonwage income
B
Which of the following would tend to increase labor supply to a particular job? A) Vesting in the firm's pension plan is pushed back from 1 year to 5 years. B) The perceived status of the job improves. C) The employer cuts back the scope and coverage of the medical plan. D) The crime rate rises in the city where the job is located.
B
A 10% increase in the wage induces Margy to increase her desired work hours by 2%.Over this range of wages, Margy's wage elasticity of labor supply is A) unit elastic. B) elastic. C) inelastic. D) negative.
C
A net increase in people's preferences for work relative to leisure in a particular market will A) decrease labor demand, reducing the wage rate. B) increase labor demand, increasing the wage rate. C) increase labor supply, reducing the wage rate. D) decrease labor supply, increasing the wage rate.
C
A perfectly competitive labor market may be characterised by all of the following except A) perfect information. B) numerous equally qualified workers. C) a few firms that dominate hiring in the market. D) neither firms nor workers have any control over the market wage
C
As distinct from product market transactions, labor market transactions are unique in that A) labor demand curves slope upward. B) the price of labor is not determined by supply and demand factors. C) to the seller, the non monetary characteristics of the sale can be as important as the price. D) they are less complex
C
Assume under an income-maintenance program that the basic benefit (income guarantee)is $9,000 and the benefit-reduction rate is 50%. If a family has an earned income of $3,000 per year, its subsidy payment will be A) $9,000. B) $6,000. C) $7,500. D) $0.
C
Consider an individual who will invest a total of $10,000 in direct and indirect costs for training in order to increase earnings by $12,500 for the next year. Suppose the interest rate is8%. If this person plans to retire the following year, the net present value of this investment is closest to A) $2,500. B) zero. C) $1,600. D) $11,600.
C
If energy and unskilled labor are gross complements, an increase in the price of energy will A) increase the demand for unskilled labor, raising the unskilled wage. B) increase the supply of unskilled labor, decreasing the unskilled wage. C) decrease the demand for unskilled labor, decreasing the unskilled wage. D) either increase or decrease the demand for unskilled labor, depending on the relative strengths of the output effect and the substitution effect.
C
On an indifference map reflecting the tradeoff between income and leisure, higher levels of utility are achieved by moving A) from left to right along a given indifference curve. B) from right to left along a given indifference curve. C) to an indifference curve further from the origin. D) to an indifference curve closer to the origin
C
Over the last few decades, the composition of the labor force has changed to include a greater proportion of women and younger workers. This fact is most consistent with the A) managerial-opposition hypothesis. B) union-growth hypothesis. C) structural-change hypothesis. D) substitution hypothesis.
C
Private loans to finance investments in human capital A) are granted by banks just as they are to finance investment in machinery or houses, without regard to collateral. B) are difficult to obtain because the financial return to education has been decreasing. C) are difficult to obtain because a person cannot readily pledge collateral on human capital. D) are rarely subsidized by government because they are granted readily by private banks
C
Suppose the union wage rate rises. The "spillover effect" suggests that the nonunion wage rate should ________ the "threat effect" suggests that the nonunion wage rate should ________. A) fall; fall B) rise; fall C) fall; rise D) rise; rise
C
The measured union wage advantage will understate the pure advantage because of the A) spillover effect. B) superior-worker effect. C) product-market effect. D) compensating wage differential effect.
C
The optimal work-leisure position is achieved where A) the difference between the MRSL,Y and the wage is greatest. B) the wage rate is greatest. C) the MRSL,Y is equal to the wage rate. D) the MRSL,Y is greatest.
C
The private rate of return on human capital may ________ the social rate because________. A) overstate; schooling provides external benefits B) understate; schooling is subsidised C) understate; schooling provides external benefits D) overstate; schooling and ability are positively correlated
C
The slope of a standard budget constraint reflects A) a diminishing marginal rate of substitution of leisure for income. B) an increasing marginal rate of substitution of leisure for income. C) the wage rate. D) a constant marginal rate of substitution of leisure for income.
C
The substitution effect is A) always dominated by the income effect. B) the combination of leisure and wage rate that maximizes one's income. C) the part of the total change in desired work hours that is due to a change in the wage rate, with real income or utility constant. D) the part of the total change in desired work hours that is due to the change in real income resulting from a change in the wage rate.
C
Typically, as the level of education increases, A) both costs and benefits fall, having an unpredictable effect on the rate of return. B) costs rise and benefits fall, increasing the internal rate of return. C) costs rise and benefits fall, reducing the internal rate of return to education. D) costs fall and benefits rise, increasing the internal rate of return.
C
Unions may reduce economic efficiency by A) providing an "exit" mechanism. B) insisting promotions be based on ability rather than seniority. C) imposing restrictive work rules. D) reducing worker turnover.
C
Value of marginal product (VMP) differs from marginal revenue product (MRP) in that A) VMP always exceeds MRP. B) MRP always exceeds VMP. C) VMP measures the value society places on the next worker's output, while MRP measures the value the firm places on the next worker's output. D) MRP measures the value society places on the next worker's output, while VMP measures the value the firm places on the next worker's output.
C
Which of the following best describes the substitution effect of a wage increase? A) The firm's marginal cost increases, the firm desires to produce less output, and therefore less labor is required. B) The firm's labor demand curve becomes more elastic, causing it to employ less labor C) The cost of labor is relatively higher, causing the firm to use relatively less labor. D) The firm's labor demand curve becomes less elastic, causing it to employ less labor
C
Which of the following is not a major responsibility of a national union? A) organising workers in its craft or industry B) negotiating collective bargaining agreements C) handling grievance procedures D) settling jurisdictional disputes
C
A household will tend to substitute goods for time in the production of commodities if A) the household's total income decreases. B) the substitution effect of a wage decrease exceeds the income effect. C) a household member's market wage decreases. D) a household member's market wage increases
D
An individual whose MRSL,Y exceeds the wage at her current combination of leisure and income could increase utility by A) None of the other choices is correct; her utility is maximized. B) increasing her income. C) working more hours. D) working fewer hours.
D
Assume that skilled labor and energy are substitutes in production. An increase in energy prices is then predicted to A) unambiguously decrease the demand for skilled labor. B) unambiguously increase the demand for skilled labor. C) increase the demand for skilled labor if the output effect outweighs the substitution effect. D) decrease the demand for skilled labor if the output effect outweighs the substitution effect
D
Compared to present-oriented people, individuals who are more future-oriented tend to have ________ discount rates and consequently tend to obtain ________ education and earnings. A) higher; more B) lower; less C) higher; less D) lower; more
D
If labor supply is perfectly inelastic, the economic incidence of the payroll tax A) is the same as the statutory incidence of the tax. B) is split equally between workers and consumers, because firms pass on their share in the form of higher prices. C) falls entirely on firms. D) falls entirely on workers.
D
Imperfect and costly labor market information will likely result in A) wages converging to a common rate. B) instantaneous adjustment to equilibrium in response to short-run wage differentials. C) an inverse relationship between wages and the risk of injury on the job. D) a distribution of wages around the mean for any occupation, independently of compensating differentials.
D
In comparing two otherwise identical industries X and Y, an economist finds that labor demand is less elastic in industry X. Which of the following would support this finding? A) Labor costs as a percentage of total costs are relatively higher in X than in Y. B) Substitute resources have a more elastic supply in X than in Y. C) Product demand elasticity is higher in X than in Y. D) Capital and labor are less easily substituted for one another in X than in Y.
D
Suppose a working mother is currently ineligible for any government assistance. If she were then to become eligible for an income-maintenance program that incorporates both a basic benefit and a positive benefit-reduction rate, A) both the income and substitution effect will cause her to increase her work effort. B) her work effort will decrease if the substitution effect is stronger than the income effect. C) her work effort will increase if the substitution effect is stronger than the income effect. D) both the income and substitution effect will cause her to decrease her work effort.
D
Suppose an individual worker is on the backward-bending portion of her labor supply curve. Then, for a wage increase, the A) income and substitution effects are equal. B) substitution effect is stronger than the income effect. C) income and substitution effects both increase desired work hours. D) income effect is stronger than the substitution effect.
D
The discouraged-worker effect indicates that A) some unemployed persons in the labor force actively seek employment. B) married women will enter the labor force to maintain household living standards after their husbands' wages have fallen. C) the labor force participation rate varies directly with the unemployment rate. D) some unemployed workers will decide to withdraw from the labor force as the unemployment rate increases.
D
The long-run labor demand curve incorporates A) the output effect only. B) neither the substitution effect nor the output effect. C) the substitution effect only. D) both the substitution effect and the output effect.
D
The market wage increases from $9 to $11 and the firm responds by reducing its labor force by 16%. The wage elasticity coefficient is A) 8, indicating elastic demand. B) 1.6, indicating elastic demand. C) 1.2, indicating elastic demand. D) 0.8, indicating inelastic demand
D
The slope of an indifference curve at any point reflects the A) substitution effect. B) income effect. C) wage rate. D) rate at which a person is willing to substitute leisure for income.
D
Unions may increase economic efficiency by A) providing an "exit" mechanism. B) insisting promotions be based on ability rather than seniority. C) imposing restrictive work rules. D) reducing worker turnover
D
Which of the following best describes the substitution effect of a wage decrease? A) The firm's marginal cost decreases, the firm desires to produce less output, and therefore less labor is required. B) The firm's labor demand curve becomes less elastic, causing it to employ less labor. C) The firm's labor demand curve becomes more inelastic, causing it to employ less labor. D) The cost of labor is relatively lower, causing the firm to use relatively more labor.
D
Which of the following best explains why the market labor supply curve is upward sloping, even though individual supply curves are normally backward-bending? A) The statement is not true: market labor supply curves are also backward-bending. B) Market labor supply curves are "price-adjusted," whereas individual supply curves are not. C) Lower wages in a given market increase the demand for labor, so more labor must be supplied to maintain labor market equilibrium. D) Higher wages in a given market attract more workers away from other activities, more than compensating for any reduction in hours by individuals already in the market.
D
Which of the following can be predicted to increase the demand for labor? A) an increase in the price of another resource, provided the output effect exceeds the substitution effect B) an increase in the price of a pure complement to labor C) a decrease in product demand D) an increase in the price of a gross substitute for labor
D
Which one of the following conditions is required for allocative efficiency? A) Marginal revenue product equals the wage rate. B) Marginal revenue product exceeds the value of marginal product by the greatest amount. C) Value of marginal product equals the marginal wage cost. D) Value of marginal product is the same in all alternative employments of a given typeof labor.
D
Which one of the following gives rise to a retirement-inducing substitution effect? As workers approach retirement age A) earnings potential decreases so that leisure becomes relatively more costly. B) wealth becomes sufficient to make retirement affordable. C) Social Security benefits become available. D) earnings potential decreases so that leisure becomes relatively less costly
D
Which one of the following observations would tend to widen the dispersion of earnings? A) Poor families pay a larger proportion of family income on education than richfamilies. B) Those with higher ability face higher costs of investment funds. C) Human capital investment demand and supply curves are negatively correlated. D) Banks charge higher interest rates on educational loans to those individuals mostlikely to face discrimination on the job.
D
Which one of the following will tend to increase the likelihood of participation in the labor force for a current nonparticipant? A) an increase in family size B) an increase in the spouse's wage C) falling productivity in household production of commodities D) a decrease in the spouse's wage
D
Which one of the following would be most likely to shift the labor supply curve to the right? A) a decrease in the wage rate B) a change in the indifference map following deterioration of working conditions C) a significant increase in dividend and interest income D) a change in the indifference map following an improvement in working conditions
D