Question 1

When an individual's wage rises,the substitution effect tends to:

Accepted Answer

A) increase hours worked. 
B) decrease hours worked. 
C) leave hours worked unchanged. 
D) an impossible prediction about what will happen to hours worked. 
A) increase hours worked. 
B) decrease hours worked. 
C) leave hours worked unchanged. 
D) an impossible prediction about what will happen to hours worked. A

Question 2

If an individual's supply of labor curve is positively sloped throughout,then:

Accepted Answer

A) the substitution effect always dominates the income effect. 
B) the income effect always dominates the substitution effect. 
C) the substitution effect dominates at low real wage levels and the income effect dominates at high real wage levels. 
D) the income effect dominates at low real wage levels and the substitution effect dominates at high real wage levels. 
A) the substitution effect always dominates the income effect. 
B) the income effect always dominates the substitution effect. 
C) the substitution effect dominates at low real wage levels and the income effect dominates at high real wage levels. 
D) the income effect dominates at low real wage levels and the substitution effect dominates at high real wage levels. A

Question 3

For a monopsonistic hirer of labor,the gap between labor's marginal revenue product and its wage rate will be greater:

Accepted Answer

A) the more elastic the supply curve for labor. 
B) the more inelastic the supply curve for labor. 
C) the more elastic the firm's demand for labor. 
D) the more inelastic the firm's demand for labor. 
A) the more elastic the supply curve for labor. 
B) the more inelastic the supply curve for labor. 
C) the more elastic the firm's demand for labor. 
D) the more inelastic the firm's demand for labor. B

Question 4

The Slutsky decomposition of the effect of the real wage on a person's labor supply decision suggests that the negative income effect of such a wage change will be larger:​

Accepted Answer

A) ​the smaller is the quantity of labor supplied and the smaller is the effect of non-labor income. 
B) ​the smaller is the quantity of labor supplied and the larger is the effect of non-labor income. 
C) ​the larger is the quantity of labor supplied and the smaller is the effect of non-labor income. 
D) ​the larger is the quantity of labor supplied and the larger is the effect of non-labor income. 
A) ​the smaller is the quantity of labor supplied and the smaller is the effect of non-labor income. 
B) ​the smaller is the quantity of labor supplied and the larger is the effect of non-labor income. 
C) ​the larger is the quantity of labor supplied and the smaller is the effect of non-labor income. 
D) ​the larger is the quantity of labor supplied and the larger is the effect of non-labor income.

Question 5

The opportunity cost of leisure is approximated by:

Accepted Answer

A) the price of leisure activities (such as theater tickets). 
B) an individual's hourly real wage rate. 
C) commuting expense. 
D) an individual's total income. 
A) the price of leisure activities (such as theater tickets). 
B) an individual's hourly real wage rate. 
C) commuting expense. 
D) an individual's total income.

Question 6

The slope of an individual's "consumption-leisure" budget constraint is:

Accepted Answer

A) 24 hours minus the number of leisure hours. 
B) total consumption divided by the wage rate. 
C) the real wage rate. 
D) the negative of the real wage rate. 
A) 24 hours minus the number of leisure hours. 
B) total consumption divided by the wage rate. 
C) the real wage rate. 
D) the negative of the real wage rate.

Question 7

If on-the-job training provides general job skills:

Accepted Answer

A) the employer will never provide such training. 
B) the employer will always provide such training. 
C) the employer may provide such training if it increases workers' wages. 
D) the employer may provide such training if workers accept a lower wage. 
A) the employer will never provide such training. 
B) the employer will always provide such training. 
C) the employer may provide such training if it increases workers' wages. 
D) the employer may provide such training if workers accept a lower wage.

Question 8

Adoption of a guaranteed annual income with benefits (B)given by
B = 20,000 -.5 (earnings)
Would be expected to reduce work effort by low wage workers because:

Accepted Answer

A) the income effect would outweigh the substitution effect of the plan. 
B) the substitution effect would outweigh the income effect of the plan. 
C) both substitution and income effects would operate to reduce work effort. 
D) the plan would make working financially unattractive. 
A) the income effect would outweigh the substitution effect of the plan. 
B) the substitution effect would outweigh the income effect of the plan. 
C) both substitution and income effects would operate to reduce work effort. 
D) the plan would make working financially unattractive.

Question 9

If a firm is a monopsonistic hirer of labor:

Accepted Answer

A) its marginal expense for labor is greater than the market wage. 
B) its marginal expense for labor is equal to the market wage. 
C) its marginal expense for labor is less than the market wage. 
D) it is a price taker in the labor market. 
A) its marginal expense for labor is greater than the market wage. 
B) its marginal expense for labor is equal to the market wage. 
C) its marginal expense for labor is less than the market wage. 
D) it is a price taker in the labor market.

Question 10

Consider two situations: In situation A,the production of widgets is monopolized by a single firm.In situation B,the production of widgets is perfectly competitive.In both situations,the supply of labor to widget makers is infinitely elastic at a wage of w.In this case,the product  :

Accepted Answer

A) will be the same in the two cases. 
B) will be higher in case B than in case A. 
C) will be higher in case A than in case B. 
D) From the information given,it is not possible to make a definite statement about the marginal value product of labor. 
A) will be the same in the two cases. 
B) will be higher in case B than in case A. 
C) will be higher in case A than in case B. 
D) From the information given,it is not possible to make a definite statement about the marginal value product of labor.

Question 11

A monopsonist that faces a labor supply curve of the form l = 4w and has a constant marginal revenue product of 50 per unit of l,will opt for the following,w,l combination:

Accepted Answer

A) w = 10 l = 40. 
B) w = 25 l = 100. 
C) w = 50 l = 200. 
D) w = 100 l = 400. 
A) w = 10 l = 40. 
B) w = 25 l = 100. 
C) w = 50 l = 200. 
D) w = 100 l = 400.

Question 12

When an individual's wage rises,the income effect tends to:

Accepted Answer

A) increase hours worked. 
B) decrease hours worked. 
C) leave hours worked unchanged. 
D) an impossible prediction about what will happen to hours worked. 
A) increase hours worked. 
B) decrease hours worked. 
C) leave hours worked unchanged. 
D) an impossible prediction about what will happen to hours worked.

Question 13

Which of the following best explains why the elasticity of supply of labor for an individual with a Cobb-Douglas utility function (for consumption and leisure)is zero?

Accepted Answer

A) Income and substitution effects are precisely offsetting. 
B) The elasticity of substitution of leisure for consumption is zero. 
C) Leisure is an inferior good. 
D) Consumption is subject to diminishing marginal utility. 
A) Income and substitution effects are precisely offsetting. 
B) The elasticity of substitution of leisure for consumption is zero. 
C) Leisure is an inferior good. 
D) Consumption is subject to diminishing marginal utility.

Question 14

A monopolist union that desired to maximize its total wage bill (w ⋅ l)would offer that quantity of labor for which:

Accepted Answer

A) labor's marginal productivity is zero. 
B) labor's wage falls to zero. 
C) the quantity of labor hired is as great as possible given the firm's demand curve. 
D) the marginal revenue from providing one more worker to the market is zero. 
A) labor's marginal productivity is zero. 
B) labor's wage falls to zero. 
C) the quantity of labor hired is as great as possible given the firm's demand curve. 
D) the marginal revenue from providing one more worker to the market is zero.

Question 15

The fact that more women have chosen to work as real wages rise is evidence that,for them:

Accepted Answer

A) leisure is an inferior good. 
B) income and substitution effects of higher real wages work in the same direction. 
C) income and substitution effects of higher real wages may work in opposite directions. 
D) income and substitution effects may work in opposite directions but that the substitution effect is stronger. 
A) leisure is an inferior good. 
B) income and substitution effects of higher real wages work in the same direction. 
C) income and substitution effects of higher real wages may work in opposite directions. 
D) income and substitution effects may work in opposite directions but that the substitution effect is stronger.

Question 16

If an individual is maximizing his or her utility,his or her marginal rate of substitution of leisure hours for consumption will be:

Accepted Answer

A) equal to one divided by his or her wage rate. 
B) greater than one divided by his or her wage rate. 
C) equal to his or her wage rate. 
D) less than his or her wage rate. 
A) equal to one divided by his or her wage rate. 
B) greater than one divided by his or her wage rate. 
C) equal to his or her wage rate. 
D) less than his or her wage rate.

Question 17

"Compensating wage differentials" arise because:

Accepted Answer

A) workers possess different skills. 
B) workers prefer the characteristics of some to those of others. 
C) firms pay higher wages for workers with higher marginal productivities. 
D) firms discriminate in hiring. 
A) workers possess different skills. 
B) workers prefer the characteristics of some to those of others. 
C) firms pay higher wages for workers with higher marginal productivities. 
D) firms discriminate in hiring.

Question 18

A price discriminating monopsonist could increase its profits by:

Accepted Answer

A) paying the minimum wages possible. 
B) hiring as little capital as possible. 
C) paying lower wages to workers with inelastic supply of labor curves than to workers with elastic curves. 
D) paying lower wages to workers with elastic supply of labor curves than to workers with inelastic curves. 
A) paying the minimum wages possible. 
B) hiring as little capital as possible. 
C) paying lower wages to workers with inelastic supply of labor curves than to workers with elastic curves. 
D) paying lower wages to workers with elastic supply of labor curves than to workers with inelastic curves.

Question 19

If an individual's supply of labor curve is "backward bending," (that is,labor supply falls at high wage rates)then:

Accepted Answer

A) the substitution effect always dominates the income effect. 
B) the income effect always dominates the substitution effect. 
C) the substitution effect dominates at low real wage levels and the income effect dominates at high real wage levels. 
D) the income effect dominates at low real wage levels and the substitution effect dominates at high real wage levels. 
A) the substitution effect always dominates the income effect. 
B) the income effect always dominates the substitution effect. 
C) the substitution effect dominates at low real wage levels and the income effect dominates at high real wage levels. 
D) the income effect dominates at low real wage levels and the substitution effect dominates at high real wage levels.

Question 20

Which of the following strategies that a union might pursue would result in the lowest wage rate for its members?

Accepted Answer

A) Maximizing the total wage bill 
B) Maximizing employment of its members 
C) Restricting union membership severely 
D) Maximizing the total economic rent obtained by its members 
A) Maximizing the total wage bill 
B) Maximizing employment of its members 
C) Restricting union membership severely 
D) Maximizing the total economic rent obtained by its members

When an individual's wage rises,the substitution effect tends to:

If an individual's supply of labor curve is positively sloped throughout,then:

For a monopsonistic hirer of labor,the gap between labor's marginal revenue product and its wage rate will be greater:

The Slutsky decomposition of the effect of the real wage on a person's labor supply decision suggests that the negative income effect of such a wage change will be larger:

The opportunity cost of leisure is approximated by:

The slope of an individual's "consumption-leisure" budget constraint is:

If on-the-job training provides general job skills:

Adoption of a guaranteed annual income with benefits (B)given by B = 20,000 -.5 (earnings) Would be expected to reduce work effort by low wage workers because:

If a firm is a monopsonistic hirer of labor:

Consider two situations: In situation A,the production of widgets is monopolized by a single firm.In situation B,the production of widgets is perfectly competitive.In both situations,the supply of labor to widget makers is infinitely elastic at a wage of w.In this case,the product :

A monopsonist that faces a labor supply curve of the form l = 4w and has a constant marginal revenue product of 50 per unit of l,will opt for the following,w,l combination:

When an individual's wage rises,the income effect tends to:

Which of the following best explains why the elasticity of supply of labor for an individual with a Cobb-Douglas utility function (for consumption and leisure)is zero?

A monopolist union that desired to maximize its total wage bill (w ⋅ l)would offer that quantity of labor for which:

The fact that more women have chosen to work as real wages rise is evidence that,for them:

If an individual is maximizing his or her utility,his or her marginal rate of substitution of leisure hours for consumption will be:

"Compensating wage differentials" arise because:

A price discriminating monopsonist could increase its profits by:

If an individual's supply of labor curve is "backward bending," (that is,labor supply falls at high wage rates)then:

Which of the following strategies that a union might pursue would result in the lowest wage rate for its members?

Preferences and Utility

Utility Maximization and Choice

Income and Substitution Effects

Demand Relationships Among Goods

Uncertainty

Game Theory

Production Functions

Cost Functions

Profit Maximization

The Partial Equilibrium Competitive Model

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters

Exam 14: Labor Markets

When an individual's wage rises,the substitution effect tends to:

If an individual's supply of labor curve is positively sloped throughout,then:

For a monopsonistic hirer of labor,the gap between labor's marginal revenue product and its wage rate will be greater:

The Slutsky decomposition of the effect of the real wage on a person's labor supply decision suggests that the negative income effect of such a wage change will be larger:​

The opportunity cost of leisure is approximated by:

The slope of an individual's "consumption-leisure" budget constraint is:

If on-the-job training provides general job skills:

Adoption of a guaranteed annual income with benefits (B)given by B = 20,000 -.5 (earnings) Would be expected to reduce work effort by low wage workers because:

If a firm is a monopsonistic hirer of labor:

Consider two situations: In situation A,the production of widgets is monopolized by a single firm.In situation B,the production of widgets is perfectly competitive.In both situations,the supply of labor to widget makers is infinitely elastic at a wage of w.In this case,the product :

A monopsonist that faces a labor supply curve of the form l = 4w and has a constant marginal revenue product of 50 per unit of l,will opt for the following,w,l combination:

When an individual's wage rises,the income effect tends to:

Which of the following best explains why the elasticity of supply of labor for an individual with a Cobb-Douglas utility function (for consumption and leisure)is zero?

A monopolist union that desired to maximize its total wage bill (w ⋅ l)would offer that quantity of labor for which:

The fact that more women have chosen to work as real wages rise is evidence that,for them:

If an individual is maximizing his or her utility,his or her marginal rate of substitution of leisure hours for consumption will be:

"Compensating wage differentials" arise because:

A price discriminating monopsonist could increase its profits by:

If an individual's supply of labor curve is "backward bending," (that is,labor supply falls at high wage rates)then:

Which of the following strategies that a union might pursue would result in the lowest wage rate for its members?

Preferences and Utility

Utility Maximization and Choice

Income and Substitution Effects

Demand Relationships Among Goods

Uncertainty

Game Theory

Production Functions

Cost Functions

Profit Maximization

The Partial Equilibrium Competitive Model

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters

The Slutsky decomposition of the effect of the real wage on a person's labor supply decision suggests that the negative income effect of such a wage change will be larger: