Chapter 11 Labor Markets
97. In Exhibit 11-13, how many workers will the monopsonist hire?
5.
26. A competitive car wash currently hires 4 workers, who together can wash 80 cars per day. The market price of car washes is $5 per wash, and the price of workers is $60 per day. The car wash should hire a fifth worker if it would increase total production to at least:
92 cars per day.
102. Which of the following statements is true?
A monopsony is the only employer of a factor of production.
46. The process of negotiating labor contracts between the union and management concerning wages and working conditions is called
collective bargaining.
30. In Exhibit 11-5, when the marginal revenue product is $20.00, firms should
continue hiring workers.
8. In Exhibit 11-4, the equilibrium wage and the number of food servers employed per day, respectively, are:
$4.00 and 10,000.
28. In Exhibit 11-4, assume that both input and output markets are perfectly competitive. If one additional server increases the number of meals sold by four per day and each meal sells for $10, each additional food server will be paid:
$40 per day.
4. In Exhibit 11-2, if product price is fixed at $5, the MRP of the third worker is equal to:
$175.
24. Harold Brown runs a company that sells encyclopedia sets for $250 each. When he employs 10 workers, they can sell 60 sets per week, while only 54 sets are sold when 9 workers are employed. What is the weekly marginal revenue product of the tenth worker?
$1,500.
27. In Exhibit 11-3, the total wage cost of hiring 6 employees is:
$108 per hour.
98. Use Exhibit 11-13. What wage rate will the monopsonist pay the workers?
$12.
89. Suppose a firm can hire 100 workers at $8.00 per hour but must pay $8.05 per hour to hire 101 workers. Marginal factor cost (MFC) for the 101st worker is approximately equal to:
$13.05.
100. Lorna's Lumberyard is a monopsony. Lorna estimates that at a wage of $10, 100 workers would be willing to work for her. Similarly, at a wage of $12, 200 workers would be willing to work. Her marginal factor cost is:
$14.
31. In Exhibit 11-5, at what wage rate will the firms stop hiring these workers?
$15.00.
90. BigBiz, a local monopsonist, currently hires 50 workers and pays them $6 per hour. To attract an additional worker to its labor force, BigBiz would have to raise the wage rate to $6.25 per hour. What is BigBiz's marginal factor cost?
$18.75 per hour.
70. In Exhibit 11-10, the marginal factor cost of the 8th employee is:
$21.
3. Tucker Corporation sells its product for $5.00. Tucker's industrial engineers have informed management that hiring one additional worker will increase output by five units per hour. Tucker should hire the additional worker only if the wage rate is:
$25.00 or less per hour.
96. In Exhibit 11-12, at the profit-maximizing level of employment, the firm's MFC is equal to ____ and the firm's MRP is equal to ____.
$30; $30
2. Refer to Exhibit 11-1. What is the marginal revenue product of the fifth unit of labor?
$36.
5. Which of the following most clearly illustrates the concept of derived demand?
An increase in the demand for new houses leads to an increase in the demand for construction workers.
67. Describe the factors that could cause an increase in the wage rate of workers.
Anything that increases the demand or reduces the supply of labor will result in an increase in the wage for those workers employed. Increases in the demand for labor could be caused by an increase in the price of the product produced, and increase in technology or anything else that increases the productivity of workers. A decrease in the supply of labor could be accomplished by unionizing.
93. If the labor market shown in Exhibit 11-8 is a monopsony, the wage rate and number of workers employed will be determined at point:
B.
66. The demand curve for labor of Coca-Cola manufacturers will not shift to the right if:
Coca-Cola workers become unionized.
61. In Exhibit 11-7, which of the following could have caused the shift in labor demand from D1 to D2?
Increase in the demand for the product.
50. Describe the two basic strategies of unions in increasing wage rates for their members.
Increasing demand or decreasing supply of workers would increase the wages for members of a union. Featherbedding, licensing requirements, long apprenticeships are among some of the tactics to accomplish this.
104. Which of the following is not true about a monopsonist?
It can set the wage rate and hire any desired number of workers at that wage.
10. Which of the following is the most accurate definition of a worker's marginal revenue product?
The change in the firm's total revenue as the result of hiring an additional worker.
63. If a union is able to successfully lobby Congress to limit imports of rival products, and thus to raise the demand (and thus price) for the goods or services they make, then which of the following best describes the outcome?
The demand for labor will increase.
69. Explain why wage rates might rise at Joe's Quik-Print Shop if Joe replaces his aging copy machines with state-of-the-art copy machines.
The improvement in technology will boost the productivity of Joe's employees. Their MRP will rise, and since Joe's labor demand curve is the MRP curve, he will be willing and able to hire more workers and pay higher wage rates.
88. Explain why a monopsonist's marginal factor cost curve must lie above its labor supply curve.
The labor supply curve shows the wage rate to be paid in order to hire each additional unit of labor. For a monopsonist, when it offers higher wages to attract additional units of labor, it must also pay the higher wage to all other workers. Therefore, the change in total labor cost rises even faster than the average wage rate, and hence the MFC curve will lie above the labor supply curve.
44. Which of the following will decrease the demand for fast-food burger workers' labor?
The price of pizza, a substitute for burgers, decreases.
9. The marginal revenue product of a resource:
equals the extra output produced by an additional unit of the resource multiplied by the price of that output.
32. Describe the decision for a perfectly competitive employer in determining the profit maximizing quantity of labor to employ.
The profit maximizing quantity of labor to employ exists at that quantity where the marginal revenue product of labor (MRP) equals the wage rate (W). The MRP equals the marginal product of labor multiplied by the price of the output produced. This information as well as the wage is required to decide the optimal number of workers to employ. If the MRP > W then employ more workers until they're equal.
62. According to the economic theory of labor markets, if unions are successful in raising wages, with no accompanying increase in labor productivity, then which of the following is true?
The quantity of labor demanded by profit-maximizing firms will decline.
37. Explain how the presence of a superstar basketball player can increase the marginal revenue product of the other players on the team.
The superstar is a complement, raising the other players' marginal products by diverting the opponents' defense toward him and away from the others. The others are more likely to perform better against a divided defense.
33. Which of the following statements concerning the supply of labor is true?
The typical labor supply curve is upward sloping.
68. Which of the following statements is true?
Unions can either increase demand or decrease the supply of labor.
35. A technological advance that increases the productivity of teachers can be expected to have what effects on the equilibrium labor market for teachers?
Wages will rise, and quantity of labor will rise.
60. Which of the following would cause the demand for labor to change?
a change in the price of the good produced
79. In a labor market with one employer, the marginal factor cost is:
above the labor supply curve.
65. An increase in demand for French fries will cause equilibrium wage rates:
and quantities of potato workers hired to rise.
84. Wage and MFC differ for a monopsonist because:
any wage increase applies to all workers, not just to the next hired.
87. The MFC curve increases for a monopsonist because:
as more workers are hired, all workers receive higher wages.
29. In Exhibit 11-4, suppose that in the interest of boosting incomes of the working poor, Congress imposes a minimum wage of $6.00 per hour. This minimum wage rate creates a(n):
excess supply of labor of food servers.
49. A union may negotiate limits on workload in order to increase the demand for labor and raise workers' salaries. This practice is known as:
featherbedding.
12. The labor supply curve facing an individual employer in a perfectly competitive labor market is:
horizontal.
14. A worker's accumulated investment in education, training, experience, and health is called:
human capital.
83. For a monopsonist, the supply of labor facing the firm is:
identical to the supply curve facing the market.
54. Which of the following can shift the labor demand curve to the right?
increase in productivity
58. A technological advance that increases labor productivity will:
increase the demand for labor as MP rises.
82. A monopsonist's marginal factor cost (MFC) curve lies above its supply curve because the firm must:
increase the factor price to hire more.
51. Featherbedding allows unions to increase wages by:
increasing firms' demand for labor.
55. An advance in technology which increases labor productivity will shift the:
labor demand curve to the right.
22. If the wage rate is fixed at a certain level, the:
labor supply curve is horizontal.
17. The marginal revenue product of a resource is:
larger when the product price is larger.
91. A monopsony owner believes that hiring an additional worker would increase the company's revenue by $150 per day. We can conclude that the monopsony pays its workers:
less than $150 per day.
101. Given the same marginal revenue product (MRP) and supply curves, the equilibrium quantity of labor employed in a monopsonistic labor market will be:
less than that in a competitive labor market.
76. A monopsonist hires the amount of labor where the marginal revenue product of labor equals the:
marginal factor cost of labor.
18. A firm's demand curve for labor coincides with the:
marginal revenue product curve.
41. Suppose a change in technology increases the marginal product of labor. The result is a(n):
rightward shift in the demand for labor curve.
38. A union may attempt to obtain stricter certification requirements or longer apprenticeships. These changes would raise workers' wages because they:
shift in labor supply curve leftward.
85. In Exhibit 11-12, we know this exhibit shows a monopsonistic labor market because:
the MFC curve lies above the supply of labor curve.
77. The best number of workers for any employer to hire is that quantity in which:
the marginal revenue product equals the marginal factor cost.
13. The marginal cost of labor for a perfectly competitive firm is given by:
the market wage rate.
80. If a town has a monopsony, this means:
there is only one employer.
36. If the marginal product of labor is always positive, the total revenue will grow with each additional worker. Firms do not continuously hire new workers because:
they stop when MRP = wage
75. If a monopsonist offers a wage of $6, he finds that 1,200 people are willing to work for him. This means that the:
total wage cost is $7,200.
15. The optimal hiring rule is to employ labor up to the point where:
wage = MRP
74. Suppose a monopsonist wants to hire more workers. If it has to pay the same wage to all of its workers, the:
wage and the marginal factor cost will increase.
78. A monopoly is a sole ____, and a monopsonist is a sole ____.
buyer in a product market; seller in a product market
57. If the MRP of labor decreases, labor:
demand will decrease.
99. Suppose a monopsonist hires its second worker and this hiring has a marginal factor cost of $75 per day. If the market wage is now $62.50 per day, what was the first employee earning when she worked alone?
$50.
105. In Exhibit 11-11, the wage required to hire 12 employees is equal to:
$6.80.
94. In Exhibit 11-11, the total wage cost of hiring 12 employees is equal to:
$81.60.
71. In Exhibit 11-10, the total wage cost of hiring 7 employees is:
$91.
47. Currently, union membership in the United States is about what percentage of civilian employees?
10 percent.
25. The following chart indicates the reductions in total losses due to theft if a jewelry store hires additional security guards.
4.
72. In Exhibit 11-12, suppose this labor market is unionized by a powerful union which forces a wage of $35 upon the industry. The firm would respond by hiring ____ workers and paying a wage of ____.
40; $35
23. Refer to Exhibit 11-1. If the market wage rate is $25 per day, how many workers should the firm hire if it wants to maximize profits?
6.
95. In Exhibit 11-12, a profit-maximizing firm faced with this labor market will hire ____ workers and pay a wage of ____.
60; $25
92. If the labor market shown in Exhibit 11-8 is competitive, the wage rate and number of workers employed will be determined at point:
F.
73. If an employer currently finds that the MRP of its labor resources equals $67, and the MFC equals $56, what would you advise the firm to do?
Hire additional workers.
43. If cats become a more popular pet in the United States than they are now, what can we expect to happen to the market for cat food workers?
MRP increases
64. If more and better technology is used for producing wheat in the United States than in a lesser-developed country, then the:
MRP of the U.S. workers will be higher than the MRP of the workers in the lesser-developed country.
42. Suppose the price of HD televisions decreases. As a result, the
MRP of the workers making HD televisions will decrease.
1. If a product's price increases, then its:
MRP will increase.
52. If product price increases, then:
MRP will increase.
103. Which of the following statements is true?
Marginal factor cost is the extra cost to a firm of employing one more unit of a factor of production.
59. What happens to the marginal product of labor when the market price of the good produced increases?
Stays the same.
39. A decrease in the marginal product of labor would be represented by a(n):
decrease in labor demand.
40. An increase in the demand for a product will shift the
demand for labor used to produce the product rightward.
21. The demand for a factor of production depends on the:
demand for the products that it helps to produce.
53. If union-sponsored advertisements for a particular product succeed in increasing the demand for that product, the:
demand for the union-labor used to produce the product will increase.
11. A firm's demand for labor depends on, in part, the demand for the firm's product. To summarize this idea, economists say that the demand for labor is:
derived demand.
45. A union can influence the demand for labor by:
effective advertising that convinces customers to buy the "union label."
34. If the equilibrium wage rate in Exhibit 11-4 increased, the cause could be that:
either the demand for labor increased or the supply of labor decreased.
81. A monopsony will:
employ a quantity of labor where the marginal revenue product equals the marginal factor cost.
19. The demand for labor curve is identical to the:
marginal revenue product curve.
20. Dividing the change in total revenue by the change in labor gives:
marginal revenue product of labor.
16. Firms should hire additional units of a resource as long as the:
marginal revenue product of the resource exceeds the cost of an additional unit of the resource.
48. Which part of the United States has the largest union membership measured as the percentage of civilian employees in unions?
mid-western states
7. One reason the supply of carpenters is greater than the supply of physicians is because:
of differences in human capital.
6. Which of the following is the best example of an investment in human capital?
on-the-job training received by an apprentice electrician
56. If the price of labor falls, we can expect:
quantity demanded of labor will increase.
86. A monopsonist can pick the ____, while a monopolist can pick the ____.
wage it will pay; price it will charge
