Lesson 1 Concept Quiz

The labor force is equal to:

The number of people employed and unemployed

Which of the following events will cause a surplus of workers?

a wage above the market-clearing wage

Which of the following events will cause the labor demand curve to shift up and to the right?

an increase in product demand

When the price of capital increases, the quantity of ________ demanded will ________, but the effect on ________ is ambiguous

capital; decrease; labor

When wages increase, the substitution effect implies that employment will ________ and the scale effect implies that employment will ________.

decrease; decrease

A worker's total compensation consists of

earnings plus in-kind benefits plus deferred benefits

Workers in an industry are probably underpaid if

employers have difficulty hiring and retaining qualified workers.

If a single small firm's demand for secretaries increases, then

its wage rate will remain the same and its employment level will increase

If an increase in the cost of capital increases the demand for relatively cheaper labor and lowers the demand for relatively more expensive capital, which effect dominates the relationship between K and L?

substitution effect

Economic rent is

the amount by which a worker's wage exceeds his or her reservation wage.

If the price of a product decreases due to a decrease in demand, then

the labor demand curve shifts to the left

If more people enter the labor market for architects, then

the wage rate will decrease and the employment level will increase.

If the wage rate is above W*,

there is an excess supply of labor, and the wage rate will fall.

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

From 1950 to 2009 the U.S. labor force

tripled

If the price of capital increases in an industry and the scale effect dominates,

wages and employment levels will both decrease.

Ceteris paribus literally means

"all else equal"

Which of the following occurs if a firm pays workers more than the market wage?

-Its quit rate will be lower than usual. -Its application rate will be higher than usual -It will have a surplus of labor.

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 of the following events could explain why wages and employment could fall in a competitive labor market?

The demand curve shifts left and down.