Economics 202 Module 11
If the demand for labor is unchanged, population growth will increase the supply of labor and increase the equilibrium wage.
False
Technological advancements that increase labor's productivity shift the labor supply curve to the right.
False
The substitution effect of a wage decrease examines the effect of the decrease in wage income on a worker's ability to consume goods and services.
False
How will an increase in labor productivity affect equilibrium in the labor market?
The demand for labor will increase and the equilibrium wage and quantity of labor will increase.
In the legal sector, some practice areas have declined in recent years. For example, personal-injury and medical-malpractice cases have been undercut by state laws limiting class-action suits, out-of-state plaintiffs, and payouts on damages, and securities class-action litigation has declined in part because of a buoyant stock market. How does this affect the market for lawyers?
The demand for lawyers shifts to the left.
What happens to the equilibrium wage and quantity of labor if output price rises?
The equilibrium wage and the equilibrium quantity of labor rise
Suppose the government grants child care subsidies to mothers entering the labor force. What is likely to happen to the equilibrium wage and quantity of labor?
The equilibrium wage falls and the equilibrium quantity of labor rises.
Which of the following is likely to lead to a left shift in the supply curve for labor to a firm?
The establishment of a new firm nearby that offers higher wages
Suppose you have worked at a local sandwich shop for six months and now you plan to ask your manager for a raise. How can you convince your manager that you are worth more money than you are currently being paid?
by demonstrating to your manager the marginal revenue product your employment contributes to the sandwich shop
Firms use information on labor's marginal revenue product to determine
how many workers to hire at each wage rate.
A reason why a perfectly competitive firm's demand for labor curve slopes downward is that
in the short run, as more labor is hired, labor's marginal product falls because of the law of diminishing returns
In situations where new technologies are considered complementary to workers, demand for these workers will ________, resulting in ________ in the equilibrium wage.
increase; an increase
Which of the following is likely to cause an increase in the wage rate and a fall in the employment level in a country?
A left shift in the supply curve for labor, without any change in the demand curve for labor
Which of the following is likely to cause a decrease in the wage rate and an increase in the employment level of a country?
A right shift in the supply curve for labor, without any change in the demand curve for labor
The decision rule for a profit-maximizing firm operating in a competitive market to hire an additional worker is the value of the:
marginal product of the worker should be equal to or greater than the wage rate.
Employers engaging in ________ try to enhance their profits
statistical discrimination
When expectations cause people to discriminate against a certain group, it is referred to as
statistical discrimination
Discrimination that occurs when people's preferences cause them to discriminate against a certain group is referred to as:
taste-based discrimination.
The demand for labor depends primarily on the additional output produced as a result of hiring an additional worker and
the additional revenue received from selling the output produced as a result of hiring an additional worker.
Marginal revenue product for a perfectly competitive seller is equal to
the change in total revenue that results from hiring another worker.
The term "derived demand" refers to
the demand for a factor of production that is derived from the demand for the good the factor produces.
A firm's primary interest when it hires an additional worker is
the extra revenue the firm realizes from hiring that worker.
The income effect of a wage increase is observed when
the higher wage income causes workers to take more leisure and work less.
One reason why the average salary of Major League Baseball players is higher than the average salary of college professors is
the marginal revenue product of baseball players is greater than the marginal revenue product of college professors
The labor supply for an industry would decrease if
the percentage of the population from age 16 to 65 decreases.
An individual's labor supply curve shows
the relationship between wages and the quantity of labor that she is willing to supply.
If Molly Bee increases her work hours when her wage increases, then
the substitution effect of the wage increase outweighs the income effect.
Which of the following factors will not cause the labor demand curve to shift?
the wage rate
If a worker can produce 20 units of output which can be sold for $4 per unit, what is the maximum wage that firm should pay to hire this worker?
$80
Which of the following is a reason why it is difficult to estimate the extent of economic discrimination in the labor market?
Differences in wages can be attributed to many other factors as well, such as differences in productivity and preferences.
Which of the following correctly identifies a difference between taste-based discrimination and statistical discrimination?
Employers engaging in taste-based discrimination are willing to forego profits, whereas employers engaging in statistical discrimination are trying to enhance profits.
Sarah is a high school graduate and James is a college graduate. Which of the following statements is true?
James is likely to have more human capital than Sara.
The difference between the salaries paid to movie stars and to actors who play supporting roles is much greater today than it was in the 1930s and 1940s. What factor explains this increase in relative salaries over time?
Technological advances in the entertainment industry increase the revenue that successful movies can earn. This has increased the movie studios' willingness to pay high salaries to movie stars.
Some superstar athletes in the sports industry earn very high levels of income relative to other occupations, and over time the wage differential has been increasing. What could have caused this?
Technological advances such as cable television has increased the demand for sports entertainment.
Which of the following would cause an increase in the equilibrium wage?
The demand for labor increases faster than the supply of labor.
Which of the following correctly identifies the difference between the demand for labor and the demand for final goods?
The demand for labor is derived from the demand for final goods, whereas the demand for final goods is independent of the demand for labor.
Other things remaining the same, which of the following is likely to cause a decrease in both the wage rate and the number of workers hired in a glass factory?
The introduction of labor-saving technology in the factory
What is the difference between labor's marginal product and marginal revenue product?
The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue.
The typical labor supply curve is upward sloping but it is possible for the curve to be backward bending — negatively sloped — at very high wage levels. Which of the following would cause a backward-bending supply curve?
This would occur when the income effect from an increase in the wage becomes larger than the substitution effect.
An increase in the supply of capital, which is a substitute to labor, will lead to a decrease in the demand for labor.
True
An increase in wages raises the opportunity cost of leisure and leads to an increase in the quantity of labor supplied.
True
Higher wages that compensate workers for unpleasant aspects of a job are called compensating differentials.
True
Increases in population shift the market supply curve for labor to the right.
True
The total value to society of having garbage removed is greater than the value of baseball games. Why, then, are baseball players paid more than garbage collectors?
Wages do not depend on total values but marginal values. The marginal revenue product of baseball players exceeds the marginal revenue product of garbage collectors
Women typically earn less than men, even in the same occupation. Which of the following is an explanation for this discrepancy?
Women have, on average, less workforce experience than men of the same age.
Which of the following is a likely reason for wage inequality between men and women?
Women tend to spend more time out of the labor force as compared to men.
Larry and Mike are equally skilled construction workers employed by the Brown and Root Company. Larry's job is riskier because he typically works on a scaffold 1,000 feet above ground. Larry's higher wage rate is the result of
a compensating differential
An increase in the supply of capital, which is a complement to labor, will lead to
an increase in the demand for labor.
An increase in the demand for orthodontic services leads to
an increase in the demand for orthodontists.
An increase in a perfectly competitive firm's demand for labor could be caused by
an increase in the market demand for the firm's product.
Customer discrimination occurs when
customers refuse to buy products produced by a racially diverse workforce
Marginal revenue product of labor for a competitive seller is
equal to the marginal product of labor multiplied by the output price.
Most economists believe that a small amount of the gap between the wages of white males and the wages of other groups is due to discrimination. Which of the following factors is not another factor that explains part of this gap?
geographic location
Compensating differentials are associated most closely with which of the following?
hazardous jobs
Compensating differentials are
higher wages that compensate workers for unpleasant aspects of a job.
The substitution effect of a wage increase is observed when
leisure's higher opportunity cost causes workers to take less leisure and work more.
The wage rate is the opportunity cost of
leisure.
A firm's demand for labor curve is also called its
marginal revenue product of labor curve.
Painters who paint water towers earn higher wages relative to painters who paint houses because
painting water towers is more risky than painting houses.
Worker discrimination occurs when
workers refuse to work with persons of a different race.