EC 201 Ch 12

Union members earn more than nonunion members at least ___ partially because union members work in industries where marginal revenue products of labor are relatively high regardless of unions.

10%

Is the fact that one group in the population has higher earnings than other groups evidence of economic​ discrimination

A. No. Differences in earnings between groups could be due to worker productivity. B. No. Differences in earnings between groups could be due to worker preferences.

What factors cause shifts in the labor supply curve?

A. a change in alternatives available in other labor markets B. a change in population C. a change in demographics

Why is a choosing a salary system rather than the more profitable​ commission, or​ piece-rate system, of​ compensation?

A. difficulty in measuring output B. worker dislike of risk C. concerns about quality

What happens as a firm increases the number of workers that it​ hires?

Both the marginal product of labor and the marginal revenue product of labor decrease.

Enhancement Technology

Demand curve for labor shifts to the right

increase in human capital

Demand curve for labor shifts to the right

Which of the following correctly explains the effect of a variable on the labor demand​ curve

If human capital increases​, then the labor demand curve will shift to the right.

Marginal Revenue Product

MP x P

Profit

MRP - W (wages)

What is the advantage of paying employees a salary instead of a commission for each unit of output​ sold? Employers often pay salaries when

Quality is important

A higher price of a product

Shifts the demand curve for labor to the right

In what sense do employers who discriminate pay an economic​ penalty

The employers face higher​ costs, lower profit and eventual elimination from the market.

Do union workers earn higher or lower wages than nonunion​ workers? Explain briefly.

Union members earn more than nonunion members at least partially because union members work in industries where marginal revenue products of labor are relatively high regardless of unions.

Let MRP equal the marginal revenue product of labor and W equal the wage rate. When should a firm hire more workers to increase​ profit

When MRP ​> W

Which of the factors listed below does not cause the demand curve for labor to​ shift

a change in the wage

Suppose a firm may choose between paying workers based on​ straight-time pay or by commission. Why might a firm choose to compensate its workers by​ commission? A firm might choose to pay its workers commissions instead of​ straight-time pay because

commissions attract the most productive employees

The economic penalty is not enough to eliminate discrimination because of the presence of all of the following except​:

compensating differentials.

Why is the demand curve for labor downward​ sloping? The demand curve for labor is downward sloping

due to the law of diminishing returns.

The demand curve for labor shifts with changes in

human​ capital, technology, the price of the​ product, the quantity of other​ inputs, and the number of firms in the market.

When a firm moves from​ straight-time pay to commission or​ piece-rate pay, the productivity of a​ firm's employees may

increase as less productive employees leave and those who remain have an incentive to sell more.

Define economic discrimination

is paying a person a lower wage or excluding a person from an occupation on the basis of an irrelevant characteristic such as gender.

Some firms​ don't use​ piece-rate or commission systems of compensation because

it is difficult to measure output.

Many economists have attempted to measure the effects of economic discrimination on wages. What have they​ concluded? One of their conclusions is that

most of the differences in wages are due to factors other than discrimination.

A decline in the wage rate will result in a

movement along the labor demand curve

A change in any variable other than wage causes the demand curve to

shift, resulting in an increase or decrease in the demand for labor.

If new firms enter the market

the demand curve for labor shifts to the right

As the wage​ increases

the demand for labor curve does not​ shift, but the quantity demanded of labor decreases.

Marginal Product (MP)

the difference in quantity / the difference in additional workers (usually 1)

Why are major league baseball players on average paid substantially more than college​ professors? Explain. Major league baseball players are paid more than college professors because

the marginal revenue product of major league baseball players is high relative to college professors

Increase in the quantity of inputs shifts the demand curve for labor

to the right

What is a compensating​ differential? Give an example. A compensating differential is

when higher wages are paid to compensate a worker for unpleasant aspects of a​ job, such as when workers are paid higher wages for dangerous work.

According to compensating differentials LOADING...​, would a law mandating an improvement in safety for the dangerous factory make workers in that factory better​ off? Given compensating differentials​, the safety law

would not necessarily make workers in the dangerous factory better off because it would lower their wages.