ECH Chapter 19 Quiz

The trade-off between work and leisure underlying the supply of labor involves the substitution effect and the _____ effect.

income

Reference: Ref 19-5 (Table: Workers and Corn Output) Look at the table Workers and Corn Output. Laura is a price-taking farmer who produces corn. Assume the wage rate for workers is $125 and the price per bushel of corn is $10. Suppose Laura is employing seven workers. If she reduces employment to six workers, her profits will:

increase by $105.

Reference: Ref 19-5 (Table: Workers and Corn Output) Look at the table Workers and Corn Output. Laura is a price-taking farmer who produces corn. Assume the wage rate for workers is $130 and the price per bushel of corn is $10. Suppose Laura is employing two workers. If she adds the third worker, her profits will:

increase by $80.

An increase in the demand for construction workers may come about because of a(n):

increase in the demand for new housing.

The price of an extra hour of leisure is:

the hourly wage rate.

The quantity demanded of labor will decrease if:

the price of labor rises.

Phil's Copy Studio pays its workers $60 per day and sells poster-size copies for $10 per print. If the market wage rises to $70:

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

Which of the following is most likely an example of wage disparity due to differences in talent and ability?

Nick Saban, the football coach at the University of Alabama, earns more than the local high school football coach.

Phil's Copy Studio pays its workers $60 per day and sells poster-size copies for $10 per print. Now suppose during the holiday season the price of poster-size copies increases to $12. What happens?

The demand for labor increases.

A backward-bending labor supply curve is possible only if leisure is an inferior good.

True

Which of the following formulas is CORRECT?

VMPL = MPL × P.

A firm's demand curve for labor will shift because of:

a change in the product's price.

In the United States just after the turn of the twenty-first century, 70% of total income, by far the largest share, took the form of:

compensation of employees.

A decrease in the demand for pastry chefs may come about because of an increase in the:

concern for healthy living.

A backward-bending supply curve of labor shows that at relatively low wages the _____ effect dominates the _____ effect, and the supply curve has a _____ slope.

substitution; income; positive

G. Reecy's Hamburger Joint is a fast-food restaurant. Which of the following is a factor of production?

the cook

At Hamill Manufacturing of Pennsylvania highly skilled senior machinists are paid $70,000, excluding benefits, but the average skilled machinist generates approximately $137,000 in value added. This difference is due to the fact that:

the equilibrium wage rate includes other costs, such as employee benefits, that have to be added to the $70,000 salary.

When wages increase, if the substitution effect dominates, the quantity of labor supplied will increase.

True

The equilibrium value of the marginal product of a factor is the additional value produced by the last unit of that factor employed in the factor market as a whole.

True

The fact that Tom Brady, the quarterback of the New England Patriots, is paid more than a high school football coach is an example of a wage disparity caused by compensating differentials.

True

In the U.S. labor market, African Americans have the lowest median earnings.

True

In the U.S. labor market, White men have the highest median earnings.

True

Since the 1960s the number of women in the labor force has decreased.

True

A change in the wage rate will shift the supply curve in the market for labor.

True

A lumberjack cutting giant redwoods in California being paid more than a person cutting and selling small Christmas trees is an example of wage disparity due primarily to differences in human capital.

True

An efficiency wage is higher than the equilibrium wage to motivate the employee to work hard.

True

The category compensation of employees doesn't capture the full income of labor because:

it doesn't include the earnings of proprietors.

Reference: Ref 19-13 (Scenario: The Decision to Hire Labor) Look at the scenario The Decision to Hire Labor. Holding everything else constant, if the demand for this firm's product decreases:

its value of marginal product curve shifts to the left, and it will hire fewer workers.

According to the marginal productivity theory of income distribution, if a unit of labor is paid more than a unit of capital, it is because at the equilibrium quantity of each factor, the value of the _____ product of labor is _____ product of capital.

marginal; greater than the marginal

Reference: Ref 19-13 (Scenario: The Decision to Hire Labor) Look at the scenario The Decision to Hire Labor. How many workers will this perfectly competitive, profit-maximizing firm choose to hire if the equilibrium wage is $30?

two

Reference: Ref 19-9 (Figure: The Demand for Bricklayers) Look at the figure The Demand for Bricklayers. If the price for bricks laid in the wall is $0.10 a brick, the marginal product of the second bricklayer is _____ bricks.

1,400

As stock prices rise and workers' wealth increases, workers will increase the quantity supplied of labor because they will want to buy more stock.

True

Efficiency wages reduce unemployment.

True

The U.S. labor market shows large differences in the median earnings of workers according to gender and ethnicity.

True

Actual wage differentials can be partially explained by:

differences in talent, different amounts of human capital, and compensating differentials.

Reference: Ref 19-9 (Figure: The Demand for Bricklayers) Look at the figure The Demand for Bricklayers. If the equilibrium market wage for bricklayers is $80 per day, then this masonry firm will hire _____ bricklayers.

eight

Reference: Ref 19-9 (Figure: The Demand for Bricklayers) Look at the figure The Demand for Bricklayers. The equilibrium market wage for bricklayers is $100 a day, but there is a new minimum wage of $120. Therefore:

four workers will now be hired by this firm.

According to the marginal productivity theory of income distribution, every factor of production is paid _____ the equilibrium value of its _____ product.

just; marginal

The more work people do, all other things unchanged, the:

less leisure they have.

Suppose Billy Bud's Bucking Broncos employs 20 workers at a daily wage of $60 each. The average product of labor is 30 bucking broncos per day; the marginal product of the last worker is 12 bucking broncos per day; and total fixed cost is $3,600 for equipment. What is the marginal cost of the last bucking bronco produced?

$5.00

Reference: Ref 19-9 (Figure: The Demand for Bricklayers) Look at the figure The Demand for Bricklayers. Which of the following statements is TRUE?

Bricklayers should be hired whenever the value of the marginal product of bricklayers is greater than or equal to the market wage rate of bricklayers.

Which of the following is most likely an example of wage disparity due to differences in human capital?

People with graduate degrees usually have higher earnings than people who did not graduate from high school.

According to the marginal productivity theory of income distribution, if a unit of labor is paid more than a unit of capital, it is because at the equilibrium quantity of each factor, the value of the marginal product of labor is equal to the value of the marginal product of capital.

True

According to the marginal productivity theory of income distribution, if a unit of labor is paid more than a unit of capital, it is because at the equilibrium quantity of each factor, the value of the marginal product of labor is greater than the value of the marginal product of capital.

True

At Hamill Manufacturing of Pennsylvania highly skilled senior machinists are paid $70,000, excluding benefits, but the average skilled machinist generates approximately $137,000 in value added. This is partially because diminishing returns to labor cause the value of the marginal product of the last machinist hired to be greater than the average of all of the machinists employed.

True

Holly and Emily both have a bachelor's degree in nursing from the same college. Both have been nurses for eight years. Holly works from 11 P.M. until 7 A.M., and Emily works from 7 A.M. until 3 P.M. Holly's salary is $1,000 per month higher than Emily's salary. This is an example of an efficiency wage disparity.

True

If John's wage increases from $10 to $12 per hour, his opportunity cost of leisure has decreased.

True

If John's wage increases from $10 to $12 per hour, his opportunity cost of leisure has increased.

True

If the age at which a person can receive Social Security benefits increases from 67 to 70, the supply of labor will increase.

True

If the hourly wage increases from $8 to $10 an hour and in response Jim increases the number of hours that he works from 44 to 46, the income effect is dominant.

True

Workers with more human capital usually generate a higher value of the marginal product.

True

In terms of labor supply, the income effect of a higher wage causes a(n):

decrease in the quantity of labor supplied.

Reference: Ref 19-13 (Scenario: The Decision to Hire Labor) Look at the scenario The Decision to Hire Labor. This firm experiences diminishing marginal product after it hires the _____ worker.

first

Which of the following is an input in the production of croissants?

flour

Reference: Ref 19-5 (Table: Workers and Corn Output) Look at the table Workers and Corn Output. Laura is a price-taking farmer who produces corn. Assume the wage rate for workers is $125 and the price per bushel of corn is $10. To maximize profits Laura should employ _____ workers.

four

A lower wage:

has an income effect that is always negative with respect to the quantity of labor supplied.

A _____ wage will _____ the _____ leisure.

higher; increase; opportunity cost of

Suppose a firm sells a good for a perfectly competitive price of $5. The equilibrium wage rate is $10. The first worker it hires produces five units. Two workers produce a total of nine units. Given this information, the firm will:

hire both the first and second workers.

Alex's boss notices that with each course Alex takes, he becomes a more knowledgeable and efficient worker. This is an example of:

human capital development.

The factor distribution of income reflects that:

most people receive their income based on their labor contribution.

Manufactured resources such as equipment, buildings, and tools are also known as:

physical capital.

A determinant of the demand for a factor of production is the:

productivity of the factor.

Labor with a particular skill level and training is used in only two industries: grape cultivation and cranberry cultivation. Which of the following is likely to cause an INCREASE in the demand for this type of labor?

publication of a report asserting that drinking two glasses of grape or cranberry juice every day improves digestion and heart health

As the _____ of labor used in production increases, ceteris paribus, eventually the _____ will _____.

quantity; marginal product of labor; fall

Suppose there are diminishing returns to labor. If the _____ of labor hired by a firm increases, holding everything else constant, the _____ labor will _____.

quantity; marginal product of; fall

Scott's wage is $25 per hour and he works 50 hours a week, which is his optimal labor supply. His marginal utility of one hour of leisure is equal to:

the marginal utility he gets from $25 worth of goods.

Maria operates a persimmon orchard in southeastern Oklahoma. She pays her workers $248 per week to pick and process persimmons, and she sells her persimmons for $6 per bushel. If she adds one more worker and that worker can pick and process 44 bushels per week, what will be the profit for Maria from hiring that worker?

$16

Reference: Ref 19-13 (Scenario: The Decision to Hire Labor) Look at the scenario The Decision to Hire Labor. What is the value of the marginal product of the third worker to this firm?

$25

Reference: Ref 19-13 (Scenario: The Decision to Hire Labor) Look at the scenario The Decision to Hire Labor. If this profit-maximizing firm hires two workers, what is a possible equilibrium wage rate in the labor market?

$30

In 2012, fewer than 10% of the employees of private businesses were represented by unions.

True

Which of the following is NOT a factor of production at a college?

electricity

If the marginal product is _____, the value of marginal product must be _____.

falling; falling

One reason that wage discrimination based on gender or ethnicity can continue is:

market interference or market failure associated with above-equilibrium wages.

A factor demand curve will shift because:

of a change in the price of the good the factor produces.

The marginal productivity theory of income distribution assumes that factor markets are:

perfectly competitive.