Chapter 17 Wage Determination
In the United States and other advanced economies, real wages are higher due to a ______ relative to the supply of labor.
high demand for labor
Firms that want to hire workers must pay ______ wage rates to attract them away from the alternative job opportunities available to them.
higher
Plentiful capital; advanced technology; superior health, education and training of workers; and access to abundant natural resources account for ______ in advanced economies.
higher labor productivity
The monopsonist maximizes profit by ______ and therefore paying a less-than-competitive wage rate.
hiring fewer workers
In a purely competitive labor market,
the supply of labor faced by an individual firm is perfectly elastic.
When unions are successful in raising wages, they also ______.
reduce employment in unionized firms
When a monopsonist pays a higher wage to attract an additional worker, it must pay that higher wage to ______.
all the workers it is currently employing at a lower wage
In a labor market with a wage rate of $20, what is the marginal resource cost of hiring 5 workers?
$20
Which of the following jobs is most likely to have higher wages due to compensating differences?
A job with rigid work-hour requirements and a high risk of injury or death
The general or average level of wages, like the general level of prices, includes
a wide range of different wage rates.
Real hourly ______ is equal to wages and salaries plus employers' contributions to social insurance and private benefit plans.
compensation
The quantity of goods and services a worker can obtain with nominal wages is referred to as the ______.
real wage
The nominal wage and the prices of the goods and services a person purchases determines her or his
real wage.
Which of the following are examples of wages?
~ Bonuses ~ Company-sponsored health insurance ~ Hourly pay
Industries are defined according to the products they , not the they employ.
Blank 1: produce, create, make, or manufacture Blank 2: resources, inputs, or factors
When a firm hires most of the available supply of a certain type of labor, its decision to employ more or fewer workers ______.
affects the wage rate it pays to those workers.
Wages are the price that employers pay to improve human capital.
false
Which of the following are reasons why workers in a monopsony labor market have few employment options other than working for the monopsony?
~ Finding other employment would require learning new skills. ~ They are geographically immobile.
Which of the following are contributors to the superior labor quality in advanced economies?
~ Higher levels of health ~ Better training ~ More education
Which of the following jobs pay higher wages due to compensating differences?
~ Jobs lacking benefits, such as employer-paid insurance or paid vacation ~ Jobs with a higher risk of unemployment ~ Jobs with a high risk of injury or death
Which of the following factors are significant contributors to the revenue generated by firms?
~ The strength of the demand for the firm's products ~ The productivity of workers
A monopsony is a market in which ______ substantial buying (hiring) power.
a single firm has
A union that raises wage rates by organizing all available workers and threatening to withhold labor via a strike is using the union model. (Enter only one word per blank.)
Blank 1: inclusive or industrial
In a(n) ______ labor market, many firms compete with one another to hire a specific type of labor.
purely competitive
n a(n) ______ labor market, many firms compete with one another to hire a specific type of labor.
purely competitive
In a purely competitive labor market, individual and individual are wage takers, because neither can exert any control over the market wage rate.
Blank 1: firms, companies, businesses, or employers Blank 2: workers, laborers, labor, or employees
Differing amounts of capital is a source of wage differentials.
Blank 1: human or worker
Real hourly compensation in the United States has roughly doubled since ______, and employment has increased by about ______ million workers.
1960; 96
The general, or ....... level of wages, like the general level of prices, includes a wide range of different wage rates.
Blank 1: average or mean
Wage differentials that reflect nonmonetary differences in various jobs, such as the different physical requirements for a job in construction versus a job in retail sales, are called differences.
Blank 1: compensating
In a purely competitive labor market, the supply of labor available to an individual firm is perfectly .
Blank 1: elastic
When unions attempt to use the inclusive or industrial union model to grow membership, it has the effect of raising the wage rate above equilibrium level and making the supply of labor perfectly .
Blank 1: elastic
When economists use the term ..... in its broadest sense, it applies to blue and white-collar workers, professional individuals such as lawyers, professors, and dentists, as well as small business owners
Blank 1: labor
A monopsony is a wage , because the wage rate it must pay varies directly with the number of workers it employs.
Blank 1: maker or setter
A labor market (one word) is a situation in which a single employer has substantial buying (hiring) power.
Blank 1: monopsony or monopsonist
Due to either geographic immobility or the burden of needing to acquire new skills to work in other industries, workers have few employment options in a(n) labor market.
Blank 1: monopsony or monopsonist
A person's real wage depends on .... their wage and the prices of the goods and services they purchase.
Blank 1: nominal
Groups of workers whose skills, abilities, education, and training differ from other groups and thus are not in competition with those groups for employment are called groups.
Blank 1: noncompeting or non-competing
Because real income and real are two ways of viewing the same thing, real income (compensation) per worker can increase only at about the same rate as output per worker.
Blank 1: output or production
the .... wage is the quantity of goods and services a worker can obtain from nominal wages.
Blank 1: real
The curve for each type of labor slopes upward, indicating that employers as a group must pay higher wage rates to obtain more workers.
Blank 1: supply
Wage differentials can and often arise on either the or the side of labor markets.
Blank 1: supply Blank 2: demand
In some labor markets, workers and sell their labor services collectively.
Blank 1: unionize or unio
In a purely competitive labor market, each firm employs such a small fraction of the total available supply of a specific type of labor that no single firm can influence the rate.
Blank 1: wage
The term .... (one word) refers to the price that employers pay for labor.
Blank 1: wage or wages
True or false: Unions can boost wage rates by reducing the demand for labor.
False
Which of the following statements is agreed upon by all economists?
Firms will not hire workers who cost more per hour than the value of their hourly output
Other things equal, how does a monopsonist minimize wage rates paid and thus maximize profits?
Hiring a fewer number of workers
The minimum wage is primarily designed to help which type of worker?
Less-skilled workers who are facing poverty
Which of the following occurs in a purely competitive labor market?
Numerous firms compete with one another to hire a specific type of labor.
Which factor most strongly influences the demand for labor?
Productivity
Why are real wages higher in the United States and other advanced economies than in other parts of the world?
The demand for labor in these economies is large compared to the supply of labor.
Which of the following union models attempts to increase the demand for union labor by raising demand for the products union members produce and or altering the prices of related inputs?
The demand-enhancement model
What determines the equilibrium wage rate and level of employment in a purely competitive labor market?
The intersection of the market labor demand curve and the market labor supply curve
Why are unions hesitant to demand excessive increases in wage rates
The number of union workers employed falls as wages rise.
Why are unions hesitant to demand excessive increases in wage rates?
The number of union workers employed falls as wages rise.
If a 5% increase in nominal wages is followed simultaneously by a 3% increase in the price level, what happens to the real wage?
The real wage rises by 2%.
True or false: In the "demand enhancement model," a union attempts to increase the wage rate of its members either by increasing demand for the products the union helps to produce or by altering the prices paid for inputs.
True
True or false: When a monopsonist pays a higher wage to attract an additional worker it must then pay that new higher wage to all the workers it is currently employing as well.
True
Which of the following describes a strategy used by workers to avoid competing with one another in the labor market and instead to sell their services collectively?
Unionization
What are compensating differences?
Wage differentials that must be paid to compensate for non-monetary differences in various jobs
When does a firm's decision to employ more or fewer workers affect the wage rate it pays those workers?
When the firm hires most of the available supply of a particular type of labor
If prices increase annually by 4% and you receive an annual cost of living wage rate increase of 3% for the year, which of the following is true?
Your standard of living will decrease in the coming year due to a decrease in real wages.
The data in the table illustrate that in a purely competitive labor market, when the price of a resource (say $10), is imposed on the individual competitive firm, the marginal cost of that resource (MRC) is
constant and equal to the resource or wage price of $10.
Hourly pay, annual salaries, bonuses, commissions, and royalties are all examples of ______, whereas paid vacations, health insurance, and pensions are examples of ______.
direct money payments; benefits
Wages today are approximately ______ what they were in 1960.
double
The strength of labor demand differs greatly among occupations ______.
due to differences in how much various occupational groups contribute to the revenue of their respective employers
Wage differentials arise on ______.
either the supply or the demand side of labor markets
The point at which the market labor demand curve and the market labor supply curve intersect determines the ______ wage rate and level of labor ______ in a purely competitive labor market.
equilibrium; employed
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
The purpose of the minimum wage is to provide a wage ______ that will help less-skilled workers earn enough income to escape poverty.
floor
When unions use the "craft union model" to increase the demand for union labor, they can _____ wage rates by _____ the supply of labor.
increase; reducing
In a purely competitive labor market _____ are wage takers.
individual firms and individual workers
The strength of ______ differs greatly among occupations due to differences in how much various occupational groups contribute to the revenue of their respective employers.
labor demand
The strength of ______ differs greatly among occupations due to differences in how much various occupational groups contribute to the revenue of their respective employers. Multiple choice question.
labor demand
Health, education, and training help to improve the ______ in advanced economies.
labor quality
A firm in a purely competitive labor market maximizes its profit by hiring workers to the point at which its wage rate equals ______.
marginal revenue product (MRP)
No current consensus exists on the employment or unemployment effects of the present level of the ______ wage.
minimum
Firms that want to hire workers
must pay higher wage rates to attract them away from the alternative job opportunities available to them.
As a consequence of the fact that real output in the economy flows to resource suppliers, real income per worker can increase only at about the same rate as ______.
output per worker
The supply curve for each type of labor slopes upward, which indicates that employers as a group must ______ to obtain more workers
pay higher wage rates
The supply curve for each type of labor slopes upward, which indicates that employers as a group must ______ to obtain more workers.
pay higher wage rates
Real hourly compensation is calculated as wages and salaries ______.
plus employers' contributions to social insurance and private benefit plans
Industries are defined according to the products they
produce, not the resources they employ.
The demand for labor, or for any other resource, depends on its ______.
productivity
In a purely competitive labor market, each firm employs such a ______ fraction of the total available supply of a specific type of labor that no firm can influence the ______.
small; wage rate
The revenue generated by firms depends on the productivity of the workers and the ______ for the products they are helping to produce.
strength of the demand
A monopsony is a wage maker because
the wage rate it must pay varies directly with the number of workers it employs.
Differing amounts of human capital is a source of ______.
wage differentials
Noncompeting groups refers to groups of workers ______ and each representing several occupations for which the members of the group qualify
with varying degrees of mental, physical, educational and training capacities
Which of the following are effects of inclusive unionism on wages and labor supply?
~ A perfectly elastic labor supply curve ~ An above-equilibrium wage rate
Which of the following are among the reasons for the high productivity of labor?
~ Advanced technology ~ Access to abundant natural resources ~ Labor quality
which of the following groups are considered "labor" by economists?
~ Blue- and white-collar workers of all varieties ~ Professional individuals, such as lawyers, physicians, dentists, and teachers Small-business owners
Which of the following groups are considered "labor" by economists?
~ Blue- and white-collar workers of all varieties ~ Professional individuals, such as lawyers, physicians, dentists, and teachers ~ Small-business owners
