Econ315 M1 Practice Questions
If the hourly wage is $50 and the price of output is $25, then, in the short run,
the firm should add workers if they add 2 or more units to output.
If two inputs are substitutes in production, and an increase in the price of one input shifts the demand curve for the other input to the left, then
the scale effect is greater than the substitution effect, and the two are gross complements.
Economic rent is
the amount by which a worker's wage exceeds his or her reservation wage.
Referring to the table above, diminishing marginal returns begins with the ________ employee
third
If the salaries of accountants increase and other conditions remain the same, then
a firm will move to the left along its labor demand curve for accountants
Which of the following events will cause a surplus of workers?
a wage above the market-clearing wage
Workers in an industry are probably underpaid if
employers have difficulty hiring and retaining qualified workers.
If a firm hires another unit of labor, output goes up by 12 units. The wage rate for the unit of labor is $6. What is the firm's cost of producing another unit of output using labor?
$0.50
If the price of capital increases in an industry and the scale effect dominates,
wages and employment levels will both decrease.
If more people enter the labor market for architects, then
the wage rate will decrease and the employment level will increase.
A competitive industry hires 1000 workers. The 1000th worker adds $500 a week to their employer's revenue. If a monopoly took over the industry, then the 1000th worker would likely
add less than $500 a week to their employer's revenue.
The labor force is made up of
all members of society who are at least 16 years old and are either employed or unemployed
Pareto efficiency implies that
all mutually beneficial transactions have taken place
Which of the following events will cause the labor demand curve to shift up and to the right?
an increase in product demand
Improvements in equity
involve comparing the welfare lost by some against the welfare gained by others
Declining marginal product of labor
is needed if competitive firms are to stop hiring workers at some point.
Which of the following events could explain why wages and employment could fall in a competitive labor market?
The demand curve shifts left and down.
Which of the following is NOT a distinguishing characteristic of the labor market?
Unlike in commodity markets, non-pecuniary factors are generally unimportant in employment transactions
Government policies affecting the labor market
are often based on the normative principle that society should try to make the distribution of income more equitable
If there are costs associated with employee turnover, and to reduce these costs, a firm increases the wage it pays its employees, then the firm's profits
could increase or decrease, depending on the amount in the wage increase and the change in the turnover rate
When wages increase, the substitution effect implies that employment will ________ and the scale effect implies that employment will ________.
decrease; decrease
A worker's income is equal to his
earnings plus employee benefits plus unearned income
When the price of capital increases, a firm will
employ more, less, or the same amount of labor.
The labor market does NOT
ensure that all workers are hired
Diminishing marginal returns occur because
hiring more employees means that each has less capital with which to work.
Economic rationality
implies that people have an objective and pursue it in a consistent fashion
If the firm operates in a competitive labor market,
it faces a horizontal labor supply curve, and the marginal expense of labor equals the market wage.
Which of the following occurs if a firm pays workers more than the market wage?
its application rate will be higher than usual AND its quit rate will be lower than usual
Labor markets differ from most other markets because
labor services must be rented, not bought or sold
When the price of labor falls, the quantity of ________ demanded will ________, but the effect on ________ is ambiguous.
labor; increase; capital
Economists generally assume that
people both pursue their objectives in a consistent fashion and are forced to make choices due to scarcity
If unions raise wages above their market clearing level, then
persistently high rates of unemployment will result.
If the firm hires to a point where the marginal expense of labor is greater than the marginal revenue product of labor, then
profits could be increased by reducing employment.
If skilled workers are gross complements with low-skilled immigrant labor, then, when there is an increase in low-skilled immigrant labor,
skilled workers wages will go up and their employment will go up.
Public goods are goods
that are available to an additional consumer at no cost
The marginal product of labor tells us
the additional output produced by the last employee hired.
If the price of a product decreases due to a decrease in demand, then
the labor demand curve shifts to the left
Referring to the table above, which of the following answers is INCORRECT? If pot sell for $20 each, then
the marginal revenue product of labor of the second worker is $260.
If all parties gain from a transaction
the transaction must be a Pareto improvement
In the long run, a profit-maximizing firm will select capital and labor so that
the wage divided by the marginal product of labor equals the rental cost of a unit of capital divided by the marginal product of capital.
Economists generally assume that workers maximize
their utility
For two substitutes in production, if the scale effect dominates,
then the inputs are gross complements.
If a union negotiates an industry-wide agreement to set wages above the equilibrium level,
there will be a surplus of labor in the industry.
Referring to the table above, if wages are $50.00 per day and pot sell for $20.00 each, how many growers will the firm hire?
4
A worker's hourly wage is $25 and output sells for $5 a unit. What is the minimum marginal product a worker must produce in order for a competitive employer to break even when hiring the worker?
5
Which of these persons is officially classified as being "not in the labor force"?
Meredith, who would start looking for work if he thought he could get a good job.
It has been said that teaching assistants to professors are underpaid. Which of the following would be evidence (if true) that they are underpaid?
Professors have a hard time finding qualified teaching assistants.
Which type of transaction is NOT Pareto improving?
Some parties gain and some parties lose, and the gains are larger than the losses
If two inputs are complements in production,
then the inputs are gross complements.
For two substitutes in production, if the substitution effect dominates,
then the inputs are gross substitutes.
If a single small firm's demand for secretaries increases, then
its wage rate will remain the same and its employment level will increase
It has been said that CEOs (Chief Executive Officers who are in charge of their firms) are overpaid. Which of the following would be evidence (if true) that they are, in fact, overpaid?
Firms find that they can find equally qualified persons for a lower salary.