Test Questions & Answers Chapter 8 The Labor Market

Chapter 08 Test Bank KEY

1. Ceteris paribus, the willingness and ability to work specific amounts of time at alternative wage rates in a given period of time is

A. product supply.

B. product demand.

C. labor supply.

D. labor demand.

2. The labor-supply curve depicts the quantity of _____ at alternative _____.

A. labor supplied; wage rates

B. labor demanded; wage rates

C. business sales; price levels

D. products supplied; price levels

3. An upward-sloping supply curve of labor illustrates that the

A. supply of labor and the wage rate are inversely related.

B. quantity of labor supplied and the wage rate are directly related.

C. quantity of labor supplied and the minimum wage are indirectly related.

D. quantity of labor supplied and the hours of work per week are inversely related.

4. Ceteris paribus, for an upward-sloping labor supply curve, there is an increase in the quantity of labor supplied when the

A. demand for labor increases.

B. amount of leisure time increases.

C. tax rate increases.

D. wage rate increases.

5. The supply curve for labor is upward-sloping to the right because as wages _____, the quantity of _____ rises.

A. rise; goods purchased

B. fall; work required

C. rise; labor supplied

D. fall; labor demanded

6. According to the upward-sloping labor supply curve, at lower wages

A. workers are more willing to supply labor.

B. workers are less willing to supply labor.

C. there is no opportunity cost of labor.

D. the labor supply curve shifts left.

7. All else remaining constant, or "ceteris paribus," for an upward-sloping labor supply curve, the quantity of labor supplied varies directly with

A. payroll taxes.

B. the value of leisure time.

C. the derived demand for labor.

D. the wage rate.

8. The quantity of labor supplied

A. is downward-sloping.

B. increases as the wage rate decreases.

C. increases as the wage rate increases.

D. is influenced by labor demand.

9. An upward-sloping supply curve of labor reflects the

A. increasing opportunity cost of labor.

B. increasing marginal utility of income as a person works more hours.

C. increasing quantity supplied of labor as prices fall.

D. decreasing marginal cost of labor as a firm hires more workers.

10. The opportunity cost of working is the

A. wage rate.

B. value of leisure time that must be given up.

C. expense of maintaining a household and maintaining a decent living.

D. amount of consumption that is made possible.

11. The opportunity cost of working is the

A. wage rate plus the value of fringe benefits earned in the process.

B. wage rate earned in the process, but not the fringe benefits.

C. personal satisfaction gained from working.

D. value of leisure time that is given up in the process.

12. An individual's labor-supply curve reveals how he or she chooses to allocate

A. limited dollars between luxuries and necessities.

B. scarce money between goods and services.

C. scarce time between labor and leisure.

D. limited time between work at one job and work at another.

13. A higher wage rate causes

A. a shift in an individual's labor supply curve.

B. a shift in the derived demand for labor.

C. a movement down the marginal revenue product curve.

D. the opportunity cost of leisure to increase.

14. Generally, as the number of hours worked increases, the marginal utility of leisure time tends to

A. increase.

B. remain the same.

C. decrease.

D. become zero or less.

15. As a person works more hours and leisure time declines, the opportunity cost of labor _____ and the marginal utility of income _____.

A. falls; falls

B. falls, rises

C. rises; falls

D. rises; rises

16. People tend to give up watching TV in order to study for an exam when the

A. marginal utility of watching TV exceeds the marginal utility of studying.

B. wage rate falls.

C. marginal utility of studying exceeds the marginal utility of watching TV.

D. total utility of studying exceeds the total utility of watching TV.

17. As a person works more, the number of additional hours that they are willing to work is determined by the trade-off between increasing

A. marginal utility for income and decreasing marginal utility for leisure.

B. marginal utility for leisure and decreasing marginal utility for income.

C. total utility for leisure and decreasing total utility for income.

D. marginal utility for both income and leisure.

18. Work may not seem appealing because of the opportunity cost it creates, which is the

A. leisure time that must be given up in order to work.

B. wages that the worker must give up by not working.

C. financial cost to the worker of driving to work, parking, buying lunch, etc.

D. amount of utility the worker receives when working.

19. Which of the following is a reason why workers typically require higher wages in order to work additional hours?

A. the decreasing opportunity cost of labor.

B. the decreasing value of leisure time that is given up.

C. the diminishing marginal utility of additional income.

D. the diminishing marginal revenue product of labor.

20. The market supply of labor

A. is a horizontal line.

B. refers to the amount of labor businesses hire at various wages.

C. shifts to the right when more workers enter the labor market.

D. shifts to the right when wages decrease.

21. The market supply of labor depends on the

A. number of employers.

B. marginal revenue product of labor.

C. price of the product being produced.

D. number of available workers.

22. Ceteris paribus, if additional immigrants come to the United States with marketable skills, and they decide to enter the labor market

A. there is movement up the labor supply curve.

B. the labor supply curve shifts to the right.

C. there is movement down the labor supply curve.

D. the labor supply curve shifts to the left.

23. Which of the following will decrease the market supply of labor, ceteris paribus?

A. an increase in immigration

B. a decrease in labor productivity

C. a decrease in the willingness of people to work

D. an increase in the marginal revenue product of labor

24. Ceteris paribus, if the cost of daycare increases and some workers need to leave the labor market and stay home with their children

A. there is movement up the labor supply curve.

B. there is movement down the labor supply curve.

C. the labor supply curve shifts to the right.

D. the labor supply curve shifts to the left.

25. Which of the following will not shift the labor supply curve to the right, ceteris paribus?

A. an increase in the wage rate

B. an increase in immigration

C. an improvement in working conditions

D. a number of college students decide to leave school and start working

26. The quantities of labor employers are willing and able to hire at alternative wage rates is the

A. marginal physical product of labor.

B. government employment minimum.

C. supply of labor.

D. demand for labor.

27. If a firm can hire six workers at $12 per hour but in order to hire the 7th worker it must pay all its workers $14 per hour then the additional cost of that worker is

A. $14.

B. $26.

C. $84.

D. $98.

28. The demand for labor is a derived demand because

A. labor is hired based on when the marginal revenue product is equal to the wage rate.

B. we demand what labor produces and not labor itself.

C. all products must have some labor embodied in them.

D. labor is a variable input.

29. If the demand for labor is a derived demand, then the demand for airplane pilots depends on the

A. amount of training that pilots receive.

B. cost of hiring a pilot.

C. desire for airline travel.

D. how many pilots there are.

30. A firm's demand for labor is referred to as a derived demand because it is derived from the

A. marginal physical product of labor.

B. demand for the product that labor produces.

C. wages labor receives from the firm.

D. supply of labor.

31. If consumers want to increase the wages and the number of jobs for strawberry pickers they should

A. insist that the government establish a minimum wage for strawberry pickers.

B. boycott strawberries until wages increase.

C. insist that sellers raise the price of strawberries.

D. buy more strawberries.

32. The labor demand curve slopes _____ to the right, which means that quantity of labor demanded will increase as the wage rate _____.

A. upward; falls.

B. upward; increases.

C. downward; falls.

D. downward; increases.

33. The quantity demanded of labor depends on the

A. supply of labor.

B. marginal cost of output.

C. prevailing rate of interest.

D. wage rate.

34. Other things being equal, higher wage rates will

A. decrease the quantity supplied of labor.

B. shift the labor supply curve to the right.

C. increase the quantity demanded of labor.

D. decrease the quantity demanded of labor.

35. Which of the following does NOT affect labor demand?

A. the marginal revenue product of the last worker hired

B. the productivity of workers

C. the demand for the products that labor produces

D. the supply of labor

36. A firm's demand for labor is downward-sloping because

A. total output decreases as more workers are hired.

B. the firm must raise wages to hire more workers.

C. the marginal physical product of labor decreases as more labor is hired.

D. the price of the product declines as the firm produces and sells more.

37. The marginal revenue product curve and marginal physical product curve have similar shapes because

A. marginal revenue product is equal to marginal physical product times output price, if the product price is constant.

B. marginal revenue product is equal to marginal physical product times output price, if the product price is constant.

C. marginal revenue product is equal to marginal physical product times the wage rate.

D. marginal revenue product is equal to marginal physical product plus output price.

38. The marginal revenue product of labor curve is the firm's

A. marginal physical product of labor curve divided by the wage rate.

B. labor demand curve.

C. total revenue curve.

D. labor supply curve.

39. Marginal _____ product sets _____ dollar limit on the wage rate an employer will pay.

A. physical; an upper

B. physical; a lower

C. revenue; an upper

D. revenue; a lower

40. Marginal revenue product for a perfectly competitive firm is equal to

A. marginal physical product times the wage rate.

B. marginal physical product divided by the wage rate.

C. marginal physical product divided by marginal revenue.

D. marginal physical product times the output price.

41. In order to calculate marginal revenue product, it is necessary to know the

A. price of the product and the marginal physical product.

B. marginal physical product and the unit price of the factor.

C. marginal revenue and the amount of the product produced.

D. cost of the factor and the marginal revenue.

42. The law of diminishing returns states that, ceteris paribus, the marginal physical product of labor declines as

A. additional land, raw materials, and other factors of production are employed.

B. the wage rate falls.

C. the product price declines.

D. more labor is employed.

43. The demand for labor is downward sloping because of

A. diminishing marginal returns to labor.

B. rising marginal physical product.

C. falling marginal cost.

D. rising price.

44. The marginal revenue product of labor is

A. the additional output from hiring one more worker.

B. the additional revenue a firm receives from hiring one more worker.

C. equal to the marginal physical product of labor times the wage rate.

D. equal to the price of the product times the wage rate.

45. Which of the following is the correct formula for calculating the marginal revenue product of labor?

A. the change in total output divided by the change in the quantity of labor

B. the change in the quantity of labor divided by the change in total revenue

C. the change in total revenue divided by the change in the quantity of labor

D. the percentage change in total revenue divided by the percentage change in the quantity of labor

46. The law of diminishing returns states that, ceteris paribus, the marginal physical product of labor declines as

A. additional land, raw materials, and other factors of production are employed.

B. the wage rate falls.

C. the product price declines.

D. more labor is employed.

47. The labor demand curve is downward-sloping because

A. each individual worker tends to be more productive as more workers are hired.

B. each individual worker tends to be less productive as more workers are hired.

C. marginal physical product increases as more workers are hired.

D. the amount of available labor declines as the wage rate declines.

48. When the law of diminishing returns applies, which of the following would rise with increased employment of labor, ceteris paribus?

A. marginal costs

B. fixed costs

C. wage rate

D. marginal revenue

49. The marginal product of additional workers eventually diminishes because, ceteris paribus

A. additional labor is usually less skilled and less experienced.

B. the law of diminishing marginal utility is a factor.

C. additional labor has fewer fixed factors of production to work with.

D. laborers are lazy.

50. According to the law of diminishing returns, as more workers are hired

A. marginal utility declines.

B. opportunity cost increases.

C. marginal revenue product increases.

D. marginal physical product declines.

51. A firm should continue to hire workers until the

A. marginal revenue product is equal to demand.

B. marginal physical product is equal to the number of workers hired.

C. marginal revenue product is equal to the market wage rate.

D. marginal revenue product is equal to zero.

52. When making the hiring decision, firms should compare the

A. wage rate to the marginal revenue product of the worker.

B. wage rate to the price of the product.

C. marginal revenue product to the marginal physical product.

D. price of the product to the marginal physical product of the worker.

53. If the marginal physical product of an additional unit of labor is 4 units per hour per worker, product price is constant at $9 per unit, and the wage rate is $35 per hour per worker, then

A. an additional unit of labor should not be employed because it costs more than it is worth.

B. an additional unit of labor should be employed.

C. the employer should raise wages and hire additional workers.

D. in order to earn a profit, the price of the product must decrease.

54. If the marginal physical product of the last worker hired is 3 units per hour per worker, product price is constant at $5 per unit, and the wage rate is $18 per hour per worker, then

A. the last worker hired is profitable for the firm.

B. the employer should raise wages and hire more workers.

C. the last worker hired should not be employed because they cost more than they add to revenue.

D. in order to earn a profit, the price of the product must decrease.

55. Assume a university pays the football coach significantly more than the university's president. This is justified if the coach

A. is more popular.

B. has a higher level of education.

C. has been employed at the university longer than the president.

D. brings more revenue to the university than the president.

56. Tiger Woods is paid high endorsement fees by companies because

A. his agent insists on it.

B. his marginal physical product is very low.

C. his marginal revenue product is very high.

D. he cannot live on the money made from playing golf because he has too many girlfriends.

57. The determinants of the market demand for labor include

A. marginal physical productivity.

B. individual preferences.

C. income and wealth.

D. the number of available workers.

58. The market demand for labor depends on all of the following except

A. the number of employers.

B. the marginal revenue product of labor in each firm and industry.

C. the marginal physical product of workers.

D. each worker's willingness to work at alternative wage rates.

59. Which of the following will increase the market demand for labor, ceteris paribus?

A. a decrease in the price of output produced by labor

B. an increase in the productivity of labor

C. an increase in the wage paid to labor

D. a decrease in the number of available workers

60. Which of the following will decrease the market demand for labor, ceteris paribus?

A. a decrease in immigration

B. an increase in labor productivity

C. a decrease in the price of the product produced by labor

D. a decrease in the wage rate

61. The market equilibrium wage occurs where

A. demand intersects the marginal cost curve.

B. marginal physical product equals marginal revenue product.

C. all workers and all employers are satisfied with the wage.

D. market demand for labor intersects the market supply of labor.

62. Which of the following is about the equilibrium market wage for a particular industry?

A. All workers in this industry are satisfied with the wage.

B. There is no unemployment in this industry at this wage.

C. There is a surplus of workers in this industry since the wage is high.

D. All employers in this industry are satisfied with the wage.

63. The equilibrium level of employment is determined by

A. the market demand for labor and the market supply of labor.

B. the intersection of marginal physical product and marginal revenue product.

C. government regulations.

D. collusion by the most powerful employers in a market.

64. The equilibrium wage will definitely rise if

A. demand for labor decreases and the supply of labor is constant.

B. supply of labor increases and the demand for labor is constant.

C. demand for labor increases and the supply of labor is constant.

D. both the supply of labor and the demand for labor increase.

65. The equilibrium quantity of labor will definitely increase if

A. demand for labor decreases and the supply of labor is constant.

B. supply of labor increases and the demand for labor is constant.

C. supply of labor decreases and the demand for labor is constant.

D. supply of labor decreases and the demand for labor increases.

66. Which of the following would cause the equilibrium price of labor to increase?

A. a decrease in the price of the product that labor is helping to produce

B. the use of a larger stock of capital with the labor force

C. an increase in the desire for leisure

D. a more efficient method of combining labor and capital in the production process

67. In a competitive labor market, at wages above equilibrium, the

A. quantity supplied of labor is greater than the quantity demanded.

B. labor-supply curve will shift to the left.

C. quantity demanded of labor is greater than the quantity supplied.

D. marginal revenue product of labor curve shifts to the right.

68. When people are standing in line for jobs and there are more applicants than jobs, the job market is characterized by a

A. shortage of jobs from the point of view of the buyer in the labor market.

B. surplus of jobs from the point of view of the seller in the labor market.

C. shortage of labor.

D. surplus of labor.

69. An increase in the labor productivity is best illustrated by

A. an upward shift of the marginal revenue product curve.

B. a downward shift of the marginal physical product curve.

C. a leftward shift of the labor-supply curve.

D. a rightward shift of the labor-supply curve.

70. If labor productivity rises, then wages

A. will decrease and the number of jobs will decrease.

B. will decrease, but the number of jobs will not change.

C. can increase without a decrease in the number of jobs.

D. can increase, but only if the number of jobs decrease.

71. An increase in the equilibrium price in the product market results in

A. a decrease in the quantity of labor hired.

B. an upward shift in the marginal physical product curve.

C. an upward shift in the marginal revenue product curve.

D. a reduction in wages.

72. Both wages and employment can increase at the same time as long as the

A. marginal physical product of labor decreases.

B. number of available workers increases.

C. the price of the product being produced decreases.

D. marginal revenue product of labor increases.

73. A minimum wage

A. is set below the equilibrium wage.

B. can create a surplus of workers.

C. is established by the intersection of labor demand and labor supply.

D. causes the quantity demanded of workers to be greater than the quantity supplied.

74. When the minimum wage is established above the equilibrium wage, then

A. shortages of jobs result, since the quantity supplied of labor rises.

B. surpluses of jobs result, since the quantity supplied of labor falls.

C. shortages of labor result, since the quantity demanded of labor rises.

D. surpluses of labor result, since the quantity demanded of labor falls.

75. If the government decides to raise the minimum wage, ceteris paribus,

A. all workers are better off.

B. all workers are worse off.

C. some workers are better off and others are worse off.

D. workers are not affected by a minimum wage increase, only by a decrease.

76. When the minimum wage is raised, ceteris paribus,

A. additional workers are able to find jobs, but some are still unemployed.

B. all workers are better off.

C. unemployment is reduced.

D. there are fewer jobs available.

77. If the government eliminates a minimum wage, ceteris paribus, then

A. wages will rise, but employment will fall.

B. wages will fall, but employment will rise.

C. both wages and employment will fall.

D. both wages and employment will rise.

78. A minimum wage impacts the labor market by causing

A. an increase in the quantity of labor supplied and a decrease in the quantity of labor demanded.

B. a decrease in both the quantity of labor supplied and the quantity of labor demanded.

C. an increase in both the quantity of labor supplied and the quantity of labor demanded.

D. a decrease in the quantity of labor supplied and an increase in the quantity of labor demanded.

79. The impact on the labor market due to an increase in the minimum wage

A. is significant since it increases employment.

B. cannot be measured unless the increase is more than $1.

C. depends on factors such as the size of the increase and the state of the economy.

D. is significant since it reduces unemployment.

80. Labor unions are able to maintain _____ wages for union members by _____ the market.

A. above-equilibrium; excluding some workers from

B. above-equilibrium; including all workers in

C. below-equilibrium; excluding some workers from

D. below-equilibrium; including all workers in

81. Unions influence a labor market by doing all of the following except

A. raising the wages for workers in the non-union market.

B. excluding some workers from the unionized market.

C. increasing the labor supply curve in the non-union market.

D. attaining above-equilibrium wages for union members.

82. Which of the following effects will government-imposed minimum wages NOT generate?

A. lower quantity of labor demanded

B. higher quantity of labor supplied

C. some workers made better off

D. a market shortage

83. The opportunity wage refers to the

A. income an individual loses when he or she quits a job.

B. highest wage an individual would earn in his or her best alternative job.

C. value of goods and services that could be purchased with a certain individual's income.

D. income equivalent of a volunteer worker.

84. When a worker's marginal revenue product is difficult to measure, for example, a college professor or corporate CEO, wages can be determined by the

A. supply of labor alone.

B. minimum wage.

C. wages the worker would receive in his or her best alternative job.

D. average wage of government workers.

85. The following table shows how apple output changes as additional apple pickers are hired per day. Calculate marginal physical product, total revenue, and marginal revenue product. The price of apples is $4 per basket.

Daily Apple Production

Refer to the Daily Apple Production table. What is the marginal physical product of the second apple picker?

A. 2 baskets per worker

B. 6 baskets per worker

C. 10 baskets per worker

D. 24 baskets per worker

86. The following table shows how apple output changes as additional apple pickers are hired per day. Calculate marginal physical product, total revenue, and marginal revenue product. The price of apples is $4 per basket.

Daily Apple Production

Refer to the Daily Apple Production table. What is the marginal physical product of the third apple picker?

A. 5 baskets per worker

B. 15 baskets per worker

C. 20 baskets per worker

D. 60 baskets per worker

87. The following table shows how apple output changes as additional apple pickers are hired per day. Calculate marginal physical product, total revenue, and marginal revenue product. The price of apples is $4 per basket.

Daily Apple Production

Refer to the Daily Apple Production table. What is the marginal physical product of the fourth apple picker?

A. 76 baskets per worker

B. 19 baskets per worker

C. 16 baskets per worker

D. 4 baskets per worker

88. The following table shows how apple output changes as additional apple pickers are hired per day. Calculate marginal physical product, total revenue, and marginal revenue product. The price of apples is $4 per basket.

Daily Apple Production

Refer to the Daily Apple Production table. What is the marginal physical product of the fifth apple picker?

A. 22 baskets per worker

B. 12 baskets per worker

C. 3 baskets per worker

D. 2 baskets per worker

89. The following table shows how apple output changes as additional apple pickers are hired per day. Calculate marginal physical product, total revenue, and marginal revenue product. The price of apples is $4 per basket.

Daily Apple Production

Refer to the Daily Apple Production table. What is the marginal revenue product of the second apple picker?

A. $6 per worker

B. $10 per worker

C. $24 per worker

D. $40 per worker

90. The following table shows how apple output changes as additional apple pickers are hired per day. Calculate marginal physical product, total revenue, and marginal revenue product. The price of apples is $4 per basket.

Daily Apple Production

Refer to the Daily Apple Production table. If the equilibrium wage is $20 per day, how many apple pickers will the firm hire?

A. 2 pickers

B. 3 pickers

C. 4 pickers

D. 5 pickers

91. The following table shows how apple output changes as additional apple pickers are hired per day. Calculate marginal physical product, total revenue, and marginal revenue product. The price of apples is $4 per basket.

Daily Apple Production

Refer to the Daily Apple Production table. If the equilibrium wage is $16 per day, how many apple pickers will the firm hire?

A. 2 pickers

B. 3 pickers

C. 4 pickers

D. 5 pickers

92. The following table shows how apple output changes as additional apple pickers are hired per day. Calculate marginal physical product, total revenue, and marginal revenue product. The price of apples is $4 per basket.

Daily Apple Production

Refer to the Daily Apple Production table. If the equilibrium wage is $24 per day, how many apple pickers will the firm hire?

A. 2 pickers

B. 3 pickers

C. 4 pickers

D. 5 pickers

93. The following table shows how apple output changes as additional apple pickers are hired per day. Calculate marginal physical product, total revenue, and marginal revenue product. The price of apples is $4 per basket.

Daily Apple Production

Refer to the Daily Apple Production table. As more apple pickers are hired, the firm's rate of production

A. is characterized by economies of scale.

B. experiences increasing marginal physical productivity.

C. experiences diminishing returns.

D. experiences increasing marginal revenue productivity.

94. The following table shows how apple output changes as additional apple pickers are hired per day. Calculate marginal physical product, total revenue, and marginal revenue product. The price of apples is $4 per basket.

Daily Apple Production

Refer to the Daily Apple Production table. If the price of apples increases to $6 per basket and the equilibrium wage is $30 per day, how many apple pickers will the firm hire?

A. 2 pickers

B. 3 pickers

C. 4 pickers

D. 5 pickers

95. The following table shows how apple output changes as additional apple pickers are hired per day. Calculate marginal physical product, total revenue, and marginal revenue product. The price of apples is $4 per basket.

Daily Apple Production

Refer to the Daily Apple Production table. If the price of apples increases to $8 per basket and the equilibrium wage is $48 per day, how many apple pickers will the firm hire?

A. 2 pickers

B. 3 pickers

C. 4 pickers

D. 5 pickers

96. The following table shows how apple output changes as additional apple pickers are hired per day. Calculate marginal physical product, total revenue, and marginal revenue product. The price of apples is $4 per basket.

Daily Apple Production

Refer to the Daily Apple Production table. If the price of apples increases to $10 per basket and the equilibrium wage is $40 per day, how many apple pickers will the firm hire?

A. 2 pickers

B. 3 pickers

C. 4 pickers

D. 5 pickers

97.

Based on the figure, the equilibrium wage rate is

A. $12 per hour.

B. $16 per hour.

C. $20 per hour.

D. $24 per hour.

98.

Refer to the figure. At equilibrium, ____ workers are employed and ____ workers are unemployed.

A. 48; 28

B. 68; 28

C. 48; 0

D. 68; 0

99.

Refer to the figure. At equilibrium, the wage rate is ____ per hour and ____ workers are employed.

A. $12; 68

B. $12; 40

C. $16; 68

D. $16; 96

100.

Refer to the figure. Unemployed labor at the equilibrium wage is equal to

A. zero workers.

B. 40 workers.

C. 68 workers.

D. 116 workers.

101.

Refer to the figure. A minimum wage of $20 will result in a

A. surplus of 56 workers.

B. shortage of 56 workers.

C. surplus of 28 workers.

D. shortage of 28 workers.

102.

Refer to the figure. A minimum wage of $20 will result in a surplus of _____.

A. 28 workers

B. 56 workers

C. 68 workers

D. 96 workers

103.

Refer to the figure. The equilibrium wage rate is ____ and the number of unemployed workers is ____.

A. W1 dollars per hour; 0 workers

B. W1 dollars per hour; 1,350 workers

C. W2 dollars per hour; 0 workers

D. W2 dollars per hour; 1,350 workers

104.

Refer to the figure. The equilibrium wage rate is ____ and the number of workers employed is ____.

A. W1 dollars per hour; 900 workers

B. W1 dollars per hour; 1,350 workers

C. W2 dollars per hour; 900 workers

D. W2 dollars per hour; 1,350 workers

105.

Refer to the figure. At a wage of W2 dollars per hour there is a

A. surplus of labor equal to 450 workers.

B. surplus of labor equal to 1,050 workers.

C. shortage of labor equal to 1,050 workers.

D. shortage of labor equal to 600 workers.

106.

Refer to the figure. The number of workers employed in this market at a wage rate of W2 dollars per hour is

A. 1,950 workers.

B. 1,350 workers.

C. 1,050 workers.

D. 900 workers.

107.

Refer to the figure. A minimum wage of W2 dollars per hour will result in a surplus of ____.

A. 1,950 workers

B. 1,350 workers

C. 1,050 workers

D. 900 workers

108.

Refer to the figure. At a wage rate of $30 per hour, this firm will hire _____.

A. 3 workers

B. 5 workers

C. 6 workers

D. 8 workers

109.

Refer to the figure. For the first through the sixth worker

A. marginal revenue product is greater than or equal to the equilibrium wage rate and these workers will be hired.

B. marginal revenue product is less than the equilibrium wage rate and these workers will not be hired.

C. marginal physical product is less than the equilibrium wage rate and these workers will not be hired.

D. the equilibrium wage rate is too high and the firm does not accept the wage.

110.

Refer to the figure. For the seventh through the tenth worker

A. marginal revenue product is greater than or equal to the equilibrium wage rate and these workers will be hired.

B. marginal revenue product is less than the equilibrium wage rate and these workers will not be hired.

C. marginal physical product is greater than the equilibrium wage rate and these workers will be hired.

D. the equilibrium wage rate is too high and the firm does not accept the wage.

111.

Refer to the figure. The seventh worker will

A. be hired since the marginal revenue product is greater than the wage rate.

B. not be hired since the marginal revenue product is greater than the wage rate.

C. be hired since the marginal revenue product is less than the wage rate.

D. not be hired since the marginal revenue product is less than the wage rate.

112.

Refer to the figure. The fifth worker will

A. be hired since the marginal revenue product is greater than the wage rate.

B. not be hired since the marginal revenue product is greater than the wage rate.

C. be hired since the marginal revenue product is less than the wage rate.

D. not be hired since the marginal revenue product is less than the wage rate.

113.

Pick the panel that would best model the following scenario: A significant number of immigrants enter the labor market.

A. A

B. B

C. C

D. D

114.

Pick the panel that would best model the following scenario: Demand increases for the product that labor produces.

A. A

B. B

C. C

D. D

115.

Pick the panel that would best model the following scenario: Price decreases for the final product that labor produces.

A. A

B. B

C. C

D. D

116.

Pick the panel that would best model the following scenario: The number of employers decreases.

A. A

B. B

C. C

D. D

117.

Pick the panel that would best model the following scenario: Working conditions become less pleasant.

A. A

B. B

C. C

D. D

118.

Pick the panel that would best model the following scenario: Union members go on strike.

A. A

B. B

C. C

D. D

119. One News Wire article in the text, titled "Sears to Lay off 5,500 Workers" reports that the company will reduce the number of workers in their retail stores. This article describes a labor market where labor demand is

A. unaffected by the use of tablets and smartphones.

B. a contrived demand.

C. an integrated demand.

D. a derived demand.

120. One News Wire article in the text reports the effects of the minimum wage. From an economic perspective, a minimum wage is

A. an equilibrium wage.

B. a price ceiling.

C. a price floor.

D. the only effective means for rewarding workers' efforts.

121. One News Wire article in the text reports the effects of the minimum wage. In economic terms, a minimum wage that is set above the market equilibrium wage

A. creates unemployment.

B. creates additional jobs.

C. is the only effective means for rewarding workers' efforts.

D. must be sufficient to support a family.

122. At higher wage rates, less labor is supplied.

The higher the wage rate, the more labor supplied.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-01 Cite the forces that influence the supply of labor.
Topic: Labor Supply

123. The labor-supply curve is downward-sloping because of the law of diminishing marginal returns.

The labor-supply curve is upward-sloping, reflecting the fact that at higher wage rates more labor will be supplied.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-01 Cite the forces that influence the supply of labor.
Topic: Labor Supply

124. As the opportunity cost of working increases, workers require higher rates of pay.

If the opportunity cost of working increases, then it will require a higher wage to increase the quantity of labor supplied as workers may otherwise value leisure instead.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-01 Cite the forces that influence the supply of labor.
Topic: Labor Supply

125. Since people are paid wages to work, the opportunity cost of working is zero.

Opportunity cost represents what is given up and workers have the option of enjoying time off outside of work.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-01 Cite the forces that influence the supply of labor.
Topic: Labor Supply

126. An increase in the wage rate will always cause more labor to be supplied.

At some point, an increase in the wage rate will cause labor to desire more leisure rather than work as all basic needs will be met.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-01 Cite the forces that influence the supply of labor.
Topic: Labor Supply

127. One of the determinants of the market supply of labor is the number of workers in the labor market.

As the supply of labor in a market increases, the labor supply increases (shifts to the right).

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-01 Cite the forces that influence the supply of labor.
Topic: Labor Supply

128. The concept of derived demand means that, for example, the demand for cotton pickers is determined from the demand for clothing made of cotton.

For derived demand, the demand for a final good "derives" the demand for inputs.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-02 Explain why the labor demand curve slopes downward.
Topic: Labor Demand

129. Ceteris paribus, a firm will hire more workers at higher wage rates.

A labor market will supply more workers at higher wage rates. This question suggests labor demand rises as wage rates rise.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-02 Explain why the labor demand curve slopes downward.
Topic: Labor Demand

130. The demand for labor depends on worker productivity.

Worker productivity is a determinant of labor demand and as it increases, the demand for labor increases (shifts to the right).

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-02 Explain why the labor demand curve slopes downward.
Topic: Labor Demand

131. Marginal physical product increases as more workers are hired.

If all other factors of production are held fixed, then as workers are hired the marginal physical product decreases.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-02 Explain why the labor demand curve slopes downward.
Topic: Labor Demand

132. The law of diminishing returns indicates that the marginal physical product tends to fall as additional workers are hired.

If all other factors of production are held fixed, then as workers are hired the marginal physical product decreases as each additional worker has less resources to use at work.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-02 Explain why the labor demand curve slopes downward.
Topic: Labor Demand

133. The marginal revenue product sets a lower limit on the wage rate an employer will pay.

The marginal revenue product determines the highest wage that a firm is willing to pay its workers.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-02 Explain why the labor demand curve slopes downward.
Topic: The Hiring Decision

134. Marginal revenue product determines the highest wage that a firm is willing to pay its workers.

So long as the marginal revenue product is greater than the wage rate a firm will hire workers.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-02 Explain why the labor demand curve slopes downward.
Topic: The Hiring Decision

135. A producer in a competitive labor market will continue hiring workers until the marginal revenue product for the last worker hired equals the market wage rate.

So long as the marginal revenue product is greater than the wage rate a firm will hire workers.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-02 Explain why the labor demand curve slopes downward.
Topic: The Hiring Decision

136. The marginal revenue product curve is the labor supply curve for the firm.

The labor supply curve is determined by the supply of labor, not the revenue per worker hired that firms gain.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-02 Explain why the labor demand curve slopes downward.
Topic: The Hiring Decision

137. At the intersection of labor demand and labor supply, some people who are willing to work for the equilibrium wage will not be employed.

At market equilibrium, there is no shortage or surplus of labor.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-03 Describe how the equilibrium wage and employment levels are determined.
Topic: Market Equilibrium

138. At the equilibrium wage, the quantity demanded of labor equals the quantity supplied of labor.

At market equilibrium, there is no shortage or surplus of labor.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-03 Describe how the equilibrium wage and employment levels are determined.
Topic: Market Equilibrium

139. At the equilibrium wage, there is still some unemployment because the wage is so low.

At market equilibrium, there is no shortage or surplus of labor.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-03 Describe how the equilibrium wage and employment levels are determined.
Topic: Market Equilibrium

140. If labor productivity increases, wages can rise without sacrificing jobs.

If labor productivity increases, then at each level of input more output is produced, which would mean the marginal revenue product is greater which would cover more costs.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-02 Explain why the labor demand curve slopes downward.
Topic: Changing Market Outcomes

141. A minimum wage creates a shortage of workers.

A market with a price floor (wage set above the equilibrium price) will mean that more labor is supplied then demanded, and a surplus will result.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-04 Depict how a legal minimum wage alters market outcomes.
Topic: Changing Market Outcomes

142. A minimum wage reduces the quantity of labor demanded and increases the quantity of labor supplied.

A market with a price floor (wage set above the equilibrium price) will mean that more labor is supplied then demanded, and a surplus will result.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-04 Depict how a legal minimum wage alters market outcomes.
Topic: Changing Market Outcomes

143. All workers are better off when a minimum wage is imposed.

Since with a price floor more labor will be supplied then demanded, some workers will not be able to find work.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-04 Depict how a legal minimum wage alters market outcomes.
Topic: Changing Market Outcomes

144. In order to maintain an above-equilibrium wage for its members, a union must exclude some workers.

By limiting the available workforce, a union is able to maintain a wage above the equilibrium wage.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-03 Describe how the equilibrium wage and employment levels are determined.
Topic: Changing Market Outcomes

145. It is easy to measure the value of a CEO by calculating his or her marginal revenue product.

It is very difficult to measure a CEO’s pay because of the elusiveness of the marginal revenue product.

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 08-05 Explain why wages are so unequal.
Topic: Policy Perspectives

146. If it difficult to measure the marginal revenue product of a CEO, this means that the CEO should not be paid very much because they bring little value to the company.

It is very difficult to measure a CEO’s pay because of the elusiveness of the marginal revenue product. This does not mean, however, that CEO’s should not be paid a low salary.

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 08-05 Explain why wages are so unequal.
Topic: Policy Perspectives

147. Folly Farms has no control over the wage it pays its laborers or the price it gets per bushel. The following table shows the relationship between the number of workers the farm hires and its output.

The selling price per bushel is $10 and each worker cost $100 per day. What is the marginal physical product of each worker? What is the total revenue of each unit of input? What is the marginal revenue product of each worker? What is the profit per unit of input? After which worker does the law of diminishing returns take effect? In order to maximize profit, how many workers will the farm hire?

Instructions: If you are entering any negative numbers, be sure to include a negative sign (–) in front of those numbers. 

If the market price per bushel increases to $12 how many workers will the farm hire?

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 08-03 Describe how the equilibrium wage and employment levels are determined.
Topic: The Hiring Decision

148. What would we expect to occur to the wage rate and number of persons hired if the workers formed a union?

We would expect the wage rate to go up as the union excluded some workers from the labor market. We would then expect the number of workers to decline because the firm would observe the higher wages and, relative to marginal revenue product, hiring workers would be less beneficial. As a result, employment would fall as wages rose and firms cut back on employment and output.

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 08-03 Describe how the equilibrium wage and employment levels are determined.
Topic: The Hiring Decision

149. The market supply curve for labor is upward-sloping and the market demand curve for labor is downward-sloping yet for a perfectly competitive firm, the demand curve for labor is horizontal. Explain why this is.

A single, perfectly competitive firm cannot influence market wage rates. Since it has no control over the market wage rate, it must accept the market wage rate as given. Due to its small size, it can also hire as many workers as it wants at that wage rate. This gives the demand curve for labor for the perfectly competitive firm a horizontal shape.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-03 Describe how the equilibrium wage and employment levels are determined.
Topic: The Hiring Decision

150. Kaiyun is offered a job in Colorado, working for a Fortune 500 company. She also received an offer to work in Miami for a smaller technology company. Both companies offered about the same salary, but Miami has beautiful weather year-round and beaches. If Kaiyun decides to take the job in Colorado, she will forgo the wonderful climate that Miami offers. This represents

A. trade-off.

B. opportunity cost.

C. neither a trade-off nor an opportunity cost.

D. both a trade-off and an opportunity cost.

151. The demand for labor is dependent on the demand for the final product or service.

There is a direct relationship between the demand for labor and the demand for the product or service that they produce.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-02 Explain why the labor demand curve slopes downward.
Topic: Labor Demand

152. According to the Pay Scale College Salary Report, 2018, which of the following degrees have the highest median starting salaries?

A. history

B. finance

C. sociology

D. economics

153. ABC Company implemented advanced technical training for its employees which increased the productivity of their labor force. This is likely to result in which of the following?

A. increased wages

B. increased marginal revenue product

C. increase in demand for the workers

D. All of these choices are correct.

154. The marginal physical product is the change in

A. total revenue associated with an additional unit of labor.

B. total output associated with an additional unit of labor.

C. total amount of labor used.

D. total profit earned.

155. Unions are able to maintain above-equilibrium wages by

A. increasing labor supply.

B. convincing firms to hire more workers.

C. excluding some workers.

D. lowering costs of capital.

156. An economist would argue that the best way to improve the wages of agricultural workers is for

A. consumers to demand more agricultural products.

B. growers to raise the price of agricultural products so they can pay more to their workers.

C. the government to impose a higher minimum wage for agricultural workers.

D. All of these choices are correct.

157. When we say that the demand for labor is a derived demand, we mean that the demand is

A. based on commonly derived ethical norms applicable to our society.

B. derived from commonly understood rules of economic theory.

C. derived from the value of the additional goods and services that are produced when a firm hires labor.

D. a derivative of the overall socioeconomic and political system, including all of its philosophical aspects.

158. A highly paid college football coach likely earns such a salary by:

A. winning more games.

B. attracting more fans to games.

C. causing more alumni to make donations.

D. All of these choices are correct.

159. The demand curve for labor is downward-sloping because

A. firms are greedy and only hire more workers if they can get a deal.

B. average productivity is rising.

C. marginal productivity is rising.

D. marginal productivity is falling.

160. A firm will only hire an additional worker if

A. marginal revenue product is less than average revenue product.

B. marginal revenue product is increasing; otherwise, the additional worker will diminish productivity.

C. marginal revenue product is less than the additional cost associated with hiring the worker.

D. marginal revenue product is greater than or equal to the additional cost associated with hiring the worker.

161. If a firm hires an additional worker

A. total output will rise, provided marginal physical product is greater than zero.

B. total output will rise, only if marginal physical product is also increasing.

C. total output will rise, only if marginal physical product is negative.

D. total output will remain the same because the firm is at an equilibrium.

162. Deciding an appropriate salary for a CEO is difficult because

A. CEOs have to earn more than all other employers.

B. there are very few potential CEOs.

C. the marginal revenue product of CEOs is hard to measure.

D. CEOs are not easy to replace.

163. An increase in the minimum wage tends to have which of the following effects?

A. It increases the wages of workers and the number of workers with jobs.

B. It causes a shortage of workers, because an increased number of workers seek jobs.

C. It decreases the number of workers obtaining jobs while increasing the number of workers seeking jobs.

D. It increases the number of workers while decreasing the wages of workers.

164. The labor supply curve relates the quantity of labor supplied to the

A. quantity demanded.

B. price of goods.

C. number of workers.

D. wage rate.

165. Over time, an increase in the number of workers hired will tend to _______ the marginal physical product.

A. increase

B. decrease

C. not change

D. double

166. The change in total revenue from adding one more unit of a resource is called

A. marginal physical product.

B. marginal revenue product.

C. marginal profit.

D. marginal cost.

167. A minimum wage tends to create a market

A. collapse.

B. surplus.

C. shortage.

D. equilibrium.

168. Why do engineering majors earn higher salaries than sociology majors?

A. There is a shortage of people to fill available engineering jobs.

B. Students with higher-level math skills are in high demand.

C. In the market for engineers, the quantity demanded is greater than quantity supplied.

D. All of these choices are correct.