Question 1

The income effect assumes that leisure is a normal good.

Accepted Answer

A) True 
 B)False  True

Question 2

As more labor is hired, the marginal revenue product of a competitive firm

Accepted Answer

A) increases because total revenue increases. 
B) declines because marginal product of labor declines. 
C) does not change because marginal revenue is constant. 
D) declines because output price declines. 
E) declines because marginal revenue declines. 
A) increases because total revenue increases. 
B) declines because marginal product of labor declines. 
C) does not change because marginal revenue is constant. 
D) declines because output price declines. 
E) declines because marginal revenue declines. B

Question 3

Which of the following is true of a labor market?

Accepted Answer

A) Firms supply labor and workers demand labor. 
B) Both firms and workers demand labor. 
C) Both firms and workers supply labor. 
D) Firms demand labor and workers supply labor. 
E) Neither firms nor workers demand labor. 
A) Firms supply labor and workers demand labor. 
B) Both firms and workers demand labor. 
C) Both firms and workers supply labor. 
D) Firms demand labor and workers supply labor. 
E) Neither firms nor workers demand labor. D

Question 4

The difference between marginal revenue product and marginal product is that

Accepted Answer

A) one is measurable whereas the other is not. 
B) one looks at change in costs whereas the other looks at change in revenue. 
C) one looks at change in costs whereas the other looks at change in output. 
D) one looks at change in revenue whereas the other looks at change in output. 
E) one is a real variable whereas the other is a nominal variable. 
A) one is measurable whereas the other is not. 
B) one looks at change in costs whereas the other looks at change in revenue. 
C) one looks at change in costs whereas the other looks at change in output. 
D) one looks at change in revenue whereas the other looks at change in output. 
E) one is a real variable whereas the other is a nominal variable.

Question 5

Wages are returns to individuals owning a firm.

Accepted Answer

A) True 
 B)False

Question 6

Total compensation is properly calculated by taking total pay and subtracting fringe benefits.

Accepted Answer

A) True 
 B)False

Question 7

By imposing antidiscrimination regulations that require similar pay for similar work,

Accepted Answer

A) equality of opportunity can be guaranteed. 
B) inefficiencies may result in labor markets. 
C) the effects of discrimination can be eliminated. 
D) greater efficiency can be achieved in the economy. 
E) competition among different groups of people can be promoted. 
A) equality of opportunity can be guaranteed. 
B) inefficiencies may result in labor markets. 
C) the effects of discrimination can be eliminated. 
D) greater efficiency can be achieved in the economy. 
E) competition among different groups of people can be promoted.

Question 8

The income effect in an individual's labor/leisure choice is that

Accepted Answer

A) a higher wage makes leisure more attractive, because more can be consumed with less income loss. 
B) a higher wage makes work a more attractive alternative, so more work results. 
C) lower wages cause firms to operate less often. 
D) work and leisure can be substituted for one another, because they are generally mutually exclusive activities. 
E) a higher wage makes work less necessary, so less of it is done. 
A) a higher wage makes leisure more attractive, because more can be consumed with less income loss. 
B) a higher wage makes work a more attractive alternative, so more work results. 
C) lower wages cause firms to operate less often. 
D) work and leisure can be substituted for one another, because they are generally mutually exclusive activities. 
E) a higher wage makes work less necessary, so less of it is done.

Question 9

Under a bilateral monopoly situation, price is determined by

Accepted Answer

A) efficient outcomes. 
B) government mediators. 
C) supply and demand. 
D) bargaining. 
E) government legislation. 
A) efficient outcomes. 
B) government mediators. 
C) supply and demand. 
D) bargaining. 
E) government legislation.

Question 10

Some argue that those with a college education do not earn more because they know more but because

Accepted Answer

A) the college education teaches them to conform to society. 
B) the degree indicates that they are highly self-motivated. 
C) they develop good business connections while in college. 
D) the college education teaches them to conform to business culture. 
E) professors get them good jobs. 
A) the college education teaches them to conform to society. 
B) the degree indicates that they are highly self-motivated. 
C) they develop good business connections while in college. 
D) the college education teaches them to conform to business culture. 
E) professors get them good jobs.

Question 11

Labor theory states that at best there is only a weak link between labor productivity and real wage levels.

Accepted Answer

A) True 
 B)False

Question 12

Discrimination has effectively been eliminated by government programs such as comparable worth.

Accepted Answer

A) True 
 B)False

Question 13

The market in which there is only one buyer of an input and one seller of the input is called a

Accepted Answer

A) double monopsony. 
B) double monopoly. 
C) biopoly. 
D) bilateral monopsony. 
E) bilateral monopoly. 
A) double monopsony. 
B) double monopoly. 
C) biopoly. 
D) bilateral monopsony. 
E) bilateral monopoly.

Question 14

How can one reconcile the rule that states "Hire labor until MRP = W" with the rule that states "Produce output such that MC=P"?

Accepted Answer

The two rules address two sides of the s

Question 15

If marginal productivity in the economy (however it is measured) is 90 units per day and the average price level is $2, the nominal wage would be

Accepted Answer

A) $88. 
B) $90. 
C) $2. 
D) $45. 
E) $180. 
A) $88. 
B) $90. 
C) $2. 
D) $45. 
E) $180.

Question 16

A teachers' union is an example of a craft union.

Accepted Answer

A) True 
 B)False

Question 17

According to the economists' model of labor markets, when it is observed that wages are rising while prices remain constant, it can be surmised that

Accepted Answer

A) more people are entering the job market. 
B) the supply of labor is outpacing the demand for labor. 
C) everyone is working. 
D) productivity is increasing. 
E) people are working less. 
A) more people are entering the job market. 
B) the supply of labor is outpacing the demand for labor. 
C) everyone is working. 
D) productivity is increasing. 
E) people are working less.

Question 18

Exhibit 13-3  
-Refer to Exhibit 13-3. Calculate the total revenue resulting from the output of five workers. Output price is $35 and wage is $200 per week.

Accepted Answer

$3,605
Five workers produce 30

Question 19

Labor markets are different from other markets in the sense that the

Accepted Answer

A) supply for labor is a derived supply. 
B) demand for labor is a derived demand. 
C) demand for labor depends on the supply of labor. 
D) demand for labor does not depend on anything. 
E) labor market is never in equilibrium. 
A) supply for labor is a derived supply. 
B) demand for labor is a derived demand. 
C) demand for labor depends on the supply of labor. 
D) demand for labor does not depend on anything. 
E) labor market is never in equilibrium.

Question 20

The main objective of labor unions is to maximize firm profits.

Accepted Answer

A) True 
 B)False

Exam 13: Labor Markets

The income effect assumes that leisure is a normal good.

As more labor is hired, the marginal revenue product of a competitive firm

Which of the following is true of a labor market?

The difference between marginal revenue product and marginal product is that

Wages are returns to individuals owning a firm.

Total compensation is properly calculated by taking total pay and subtracting fringe benefits.

By imposing antidiscrimination regulations that require similar pay for similar work,

The income effect in an individual's labor/leisure choice is that

Under a bilateral monopoly situation, price is determined by

Some argue that those with a college education do not earn more because they know more but because

Labor theory states that at best there is only a weak link between labor productivity and real wage levels.

Discrimination has effectively been eliminated by government programs such as comparable worth.

The market in which there is only one buyer of an input and one seller of the input is called a

How can one reconcile the rule that states "Hire labor until MRP = W" with the rule that states "Produce output such that MC=P"?

If marginal productivity in the economy (however it is measured) is 90 units per day and the average price level is $2, the nominal wage would be

A teachers' union is an example of a craft union.

According to the economists' model of labor markets, when it is observed that wages are rising while prices remain constant, it can be surmised that

Exhibit 13-3 -Refer to Exhibit 13-3. Calculate the total revenue resulting from the output of five workers. Output price is $35 and wage is $200 per week.

Labor markets are different from other markets in the sense that the

The main objective of labor unions is to maximize firm profits.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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