Question 1

Explain the income effect and the substitution effect due to an increase in the wage rate.

Accepted Answer

Leisure is considered a normal good,so the income effect leads a worker to demand more leisure as his/her wage rate,or income,increases.Therefore the worker will demand more leisure and supply less labor.However,an increase in the wage rate will also make leisure more expensive.As the price of leisure rises,households will supply more labor.These effects operate in opposite directions.

Question 2

An increase in the wage rate means that the opportunity cost of leisure has fallen.

Accepted Answer

A) True 
 B)False  False

Question 3

If the wage rate is below the equilibrium,then

Accepted Answer

A)  the supply of labor will decrease to adjust to the lower wage. 
B)  the wage will be bid up by employers. 
C)  many workers will be unemployed. 
D)  Both A and C are correct. 
A)  the supply of labor will decrease to adjust to the lower wage. 
B)  the wage will be bid up by employers. 
C)  many workers will be unemployed. 
D)  Both A and C are correct. B

Question 4

The owner of Instant Printing,a firm that prints business cards,tells you that as a result of an increase in the wage rate of printer operators he has reduced the amount of output he produces and the amount of capital he uses.How would you respond to this?

Accepted Answer

A)  You should tell him that this doesn't make any economic sense because according to the input-substitution effect, he should have substituted toward capital and away from labor. 
B)  This seems logical, because the output effect of an input price increase would cause a firm to demand less of all inputs, not just the input whose price increased. 
C)  You should tell him that instead of reducing output and the demand for all inputs, he should increase output and the demand for inputs so that he can meet the higher labor costs by generating more revenue. 
D)  You tell him that the input-substitution effect and the scale effect both suggest that he decrease the amount of capital he uses when his workers' wage rate increases. 
A)  You should tell him that this doesn't make any economic sense because according to the input-substitution effect, he should have substituted toward capital and away from labor. 
B)  This seems logical, because the output effect of an input price increase would cause a firm to demand less of all inputs, not just the input whose price increased. 
C)  You should tell him that instead of reducing output and the demand for all inputs, he should increase output and the demand for inputs so that he can meet the higher labor costs by generating more revenue. 
D)  You tell him that the input-substitution effect and the scale effect both suggest that he decrease the amount of capital he uses when his workers' wage rate increases.

Question 5

The official poverty line in the United States is currently set at ________ times the cost of a minimum food budget.

Accepted Answer

A)  two 
B)  three 
C)  four 
D)  five 
A)  two 
B)  three 
C)  four 
D)  five

Question 6

The perfectly competitive firm's short-run demand for labor is downward sloping because

Accepted Answer

A)  the output price falls as the firm produces more output. 
B)  of diminishing marginal productivity. 
C)  the labor supply curve is upward sloping. 
D)  as more labor is hired, the firm has less money available per worker. 
A)  the output price falls as the firm produces more output. 
B)  of diminishing marginal productivity. 
C)  the labor supply curve is upward sloping. 
D)  as more labor is hired, the firm has less money available per worker.

Question 7

Graphically illustrate and explain the effect of an increase in the wage rate on the demand curve for labor.

Accepted Answer

There will be no eff

Question 8

Beth is a college student looking for summer employment.She has two options.Firm X is employing lifeguards to patrol the beaches at an exclusive resort in Cancun,Mexico,while Firm Y offers her a job working in an office filing paper work and assisting with the ordering of office supplies.Given this information,

Accepted Answer

A)  Firm X may pay a wage that is higher than that of Firm Y because the work at Firm X is not very interesting. 
B)  Firm X may pay a wage that is lower than that of Firm Y because the job at Firm X has more desirable working conditions. 
C)  Firm Y will pay a wage that is higher than that of Firm X because more individuals will apply for jobs at Firm Y. 
D)  none of the above 
A)  Firm X may pay a wage that is higher than that of Firm Y because the work at Firm X is not very interesting. 
B)  Firm X may pay a wage that is lower than that of Firm Y because the job at Firm X has more desirable working conditions. 
C)  Firm Y will pay a wage that is higher than that of Firm X because more individuals will apply for jobs at Firm Y. 
D)  none of the above

Question 9

List and discuss the three key factors that explain the differences in market income.

Accepted Answer

The three factors are differences in lab

Question 10

In the United States,income has become less equally distributed in the past two decades due technology.

Accepted Answer

A) True 
 B)False

Question 11

What is the learning effect of a college education?

Accepted Answer

The learning effect of a colle

Question 12

Firms in a competitive labor market will employ labor up to the point where

Accepted Answer

A)  the wage rate equals the productivity of capital. 
B)  its marginal cost equals its marginal product. 
C)  the wage equals its marginal revenue product. 
D)  the wage equals its marginal product. 
A)  the wage rate equals the productivity of capital. 
B)  its marginal cost equals its marginal product. 
C)  the wage equals its marginal revenue product. 
D)  the wage equals its marginal product.

Question 13

Wages are higher in occupations that are considered dangerous.Which of the following job features would lead to a higher pay?

Accepted Answer

A)  night shift 
B)  mental stress 
C)  noisy environment 
D)  all of these 
A)  night shift 
B)  mental stress 
C)  noisy environment 
D)  all of these

Question 14

Since the 1980s,the proportion of income received by the poorest 20 percent of U.S.income earners has

Accepted Answer

A)  almost doubled. 
B)  increased steadily. 
C)  decreased steadily. 
D)  held relatively steady. 
A)  almost doubled. 
B)  increased steadily. 
C)  decreased steadily. 
D)  held relatively steady.

Question 15

If Sara receives a pay increase from $15 to $16 an hour and she chooses to

Accepted Answer

A)  work more, then the income effect is equal to the substitution effect. 
B)  take more vacation, then the income effect is weaker than the substitution effect. 
C)  take more vacation, then the income and substitution effects are working in the same direction with regard to leisure because it is a normal good. 
D)  work more, then the substitution effect for leisure demand is stronger than the income effect. 
A)  work more, then the income effect is equal to the substitution effect. 
B)  take more vacation, then the income effect is weaker than the substitution effect. 
C)  take more vacation, then the income and substitution effects are working in the same direction with regard to leisure because it is a normal good. 
D)  work more, then the substitution effect for leisure demand is stronger than the income effect.

Question 16

Only about 6 million people in the United States were living below the poverty line in 2010.

Accepted Answer

A) True 
 B)False

Question 17

Table 17.4
-Refer to Table 17.4.If the wage rate is $8 per worker and the output sells for $1,the firm will hire

Accepted Answer

A)  0 workers. 
B)  1 workers. 
C)  2 workers. 
D)  3 workers. 
A)  0 workers. 
B)  1 workers. 
C)  2 workers. 
D)  3 workers.

Question 18

Discrimination cannot be easily measured by simply comparing average wage rates across workers.

Accepted Answer

A) True 
 B)False

Question 19

High school graduates have a higher poverty rate than college graduates.

Accepted Answer

A) True 
 B)False

Question 20

A fast-food restaurant currently hires the amount of labor that maximizes profit at a market-determined wage of $7.25 per hour.If government legislation now states that all firms must pay their workers a minimum of $10.00 per hour,how will this legislation affect the firm's hiring decision?

Accepted Answer

The firm's demand curve for la

Explain the income effect and the substitution effect due to an increase in the wage rate.

An increase in the wage rate means that the opportunity cost of leisure has fallen.

If the wage rate is below the equilibrium,then

The owner of Instant Printing,a firm that prints business cards,tells you that as a result of an increase in the wage rate of printer operators he has reduced the amount of output he produces and the amount of capital he uses.How would you respond to this?

The official poverty line in the United States is currently set at ________ times the cost of a minimum food budget.

The perfectly competitive firm's short-run demand for labor is downward sloping because

Graphically illustrate and explain the effect of an increase in the wage rate on the demand curve for labor.

List and discuss the three key factors that explain the differences in market income.

In the United States,income has become less equally distributed in the past two decades due technology.

What is the learning effect of a college education?

Firms in a competitive labor market will employ labor up to the point where

Wages are higher in occupations that are considered dangerous.Which of the following job features would lead to a higher pay?

Since the 1980s,the proportion of income received by the poorest 20 percent of U.S.income earners has

If Sara receives a pay increase from $15 to $16 an hour and she chooses to

Only about 6 million people in the United States were living below the poverty line in 2010.

Table 17.4 -Refer to Table 17.4.If the wage rate is $8 per worker and the output sells for $1,the firm will hire

Discrimination cannot be easily measured by simply comparing average wage rates across workers.

High school graduates have a higher poverty rate than college graduates.

A fast-food restaurant currently hires the amount of labor that maximizes profit at a market-determined wage of $7.25 per hour.If government legislation now states that all firms must pay their workers a minimum of $10.00 per hour,how will this legislation affect the firm's hiring decision?

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand,supply,and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

International Trade and Public Policy

Filters

Exam 17: The Labor Market and the Distribution of Income

Explain the income effect and the substitution effect due to an increase in the wage rate.

An increase in the wage rate means that the opportunity cost of leisure has fallen.

If the wage rate is below the equilibrium,then

The owner of Instant Printing,a firm that prints business cards,tells you that as a result of an increase in the wage rate of printer operators he has reduced the amount of output he produces and the amount of capital he uses.How would you respond to this?

The official poverty line in the United States is currently set at ________ times the cost of a minimum food budget.

The perfectly competitive firm's short-run demand for labor is downward sloping because

Graphically illustrate and explain the effect of an increase in the wage rate on the demand curve for labor.

List and discuss the three key factors that explain the differences in market income.

In the United States,income has become less equally distributed in the past two decades due technology.

What is the learning effect of a college education?

Firms in a competitive labor market will employ labor up to the point where

Wages are higher in occupations that are considered dangerous.Which of the following job features would lead to a higher pay?

Since the 1980s,the proportion of income received by the poorest 20 percent of U.S.income earners has

If Sara receives a pay increase from $15 to $16 an hour and she chooses to

Only about 6 million people in the United States were living below the poverty line in 2010.

Table 17.4 -Refer to Table 17.4.If the wage rate is $8 per worker and the output sells for $1,the firm will hire

Discrimination cannot be easily measured by simply comparing average wage rates across workers.

High school graduates have a higher poverty rate than college graduates.

A fast-food restaurant currently hires the amount of labor that maximizes profit at a market-determined wage of $7.25 per hour.If government legislation now states that all firms must pay their workers a minimum of $10.00 per hour,how will this legislation affect the firm's hiring decision?

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand,supply,and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

International Trade and Public Policy

Filters