Deck 14: Labour Markets and Income Inequality

Question 1

One or two generations ago,fewer Canadians completed post -secondary training and education.One explanation for this is

A)a decrease in demand for more education in recent years.
B)wage differentials due to formal education have diminished over time.
C)a negative relationship between the acquisition of human capital and overall earnings.
D)the relative wage of more highly educated people has increased in recent years.
E)that the opportunity cost of post-secondary education has increased.

Answer 1

the relative wage of more highly educated people has increased in recent years.

Question 2

Other things being equal,individuals working in relatively risky working conditions generally

A)earn higher wages due to the greater relative demand for these individuals.
B)earn higher wages due to the reduced supply of risk-taking individuals.
C)earn lower wages because of the scarcity of these jobs.
D)do not concern economists as these situations are uncommon.
E)work in perfectly competitive labour markets.

Answer 2

earn higher wages due to the reduced supply of risk-taking individuals.

Question 3

If you choose to stay in school beyond the compulsory minimum period,you are

A)realizing the benefits of your investment in human capital.
B)delaying your investment in human capital.
C)refusing to invest in your human capital.
D)investing further in your human capital.
E)wasting your time from an economic standpoint.

Answer 3

investing further in your human capital.

Question 4

In recent years,some business schools in Canada have begun charging tuition of close to $35 000 per year for a graduate degree,whereas Arts faculties charge much lower tuition for their graduate degrees.Students are prepared to pay the high tuition in a business school because

A)the expected payoff in terms of higher future wages is large.
B)the cost of providing the business education is far higher than the cost of the Arts education.
C)the marginal revenue product of a business degree is lower than the marginal revenue product of an Arts degree.
D)the marginal cost of a business degree is less than the marginal benefit of a business degree.
E)they recognize that the investment in human capital is not worthwhile.

Question 5

In a perfectly competitive labour market,all workers would earn the same wage if

A)the world was fair.
B)workersʹ education and experience were identical.
C)all jobs had the same working conditions.
D)regional variables mattered.
E)jobs and workers were identical in every way.

Question 6

The table below shows the labour demand and labour supply schedules in a competitive labour market. TABLE 14-1
Refer to Table 14-1.In this labour market,if the wage rate is $10 per hour,how many hours of labour per month are actually employed?

A)0
B)500
C)1000
D)1300
E)1850

Question 7

A typical firm hiring in a perfectly competitive labour market faces a marginal cost curve for labour that is

A)horizontal.
B)vertical.
C)equal to the supply curve of the firm.
D)parallel to the firmʹs marginal cost curve for its product.
E)downward sloping.

Question 8

Wage differentials due to cross-worker differences in human capital

A)are not justifiable on efficiency grounds.
B)will persist in competitive equilibrium.
C)are not an important source of observed wage differentials.
D)are an example of economic distortions due to monopoly power.
E)exist because of distortions in labour markets.

Question 9

Investment in human capital can be very costly to the individual,but it can also generate large returns.Canadian census data from 2007 show that average employment income for a university graduate is approximately ________ of the average employment income of a worker with no more than a high school diploma

A)50%
B)125%
C)200%
D)300%
E)400%

Question 10

Labour-market discrimination,which keeps one group of workers out of elite (E)occupations and limits them to ordinary (O)occupations,will have which of the following effects?

A)a decrease in supply and lower wages in the O occupations
B)an increase in supply and lower wages in the E occupations
C)an increase in supply and higher wages in the E occupations
D)a decrease in supply and lower wages in the E occupations
E)an increase in supply and lower wages in the O occupations

Question 11

If labour markets were perfectly competitive,

A)all workers would eventually earn the same wage.
B)all workers would achieve the same levels of education and experience.
C)working conditions would be the same for all jobs.
D)wage differentials could still exist because of differences in workers and jobs.
E)discrimination could not create wage differentials.

Question 12

The table below shows the labour demand and labour supply schedules in a competitive labour market. TABLE 14-1
Refer to Table 14-1.If the wage rate is $15 per hour,how many hours per month are supplied to this market but are not actually employed?

A)0
B)400
C)1000
D)1100
E)1500

Question 13

The table below shows the labour demand and labour supply schedules in a competitive labour market. TABLE 14-1
Refer to Table 14-1.In a competitive labour market that clears,the equilibrium employment level would be

A)400 units.
B)500 units.
C)800 units.
D)1000 units.
E)1300 units.

Question 14

In terms of human capital,which of the following is the best example of an inherited skill?

A)a neurosurgeon who can perform brain surgery after many years of training
B)a retail worker who is able to work overtime each week
C)a worker who exercises is healthier and therefore more productive
D)a salesman doubles his sales after taking a training course
E)a music teacher who can carry a tune for the school choir

Question 15

One attempt to provide some minimum level of human capital for all citizens is a system of

A)compulsory and publicly financed education.
B)income taxation.
C)unionism.
D)comparable worth.
E)minimum wages.

Question 16

During recessions, individual investment in higher education typically ________ due to the relatively ________opportunity cost of time spent in university.

A)rises; high
B)rises; low
C)falls; high
D)falls; low
E)stays constant; constant

Question 17

One possible reason for wage differentials is that

A)there are competitive forces operating in labour markets.
B)discrimination affects labour-market outcomes.
C)working conditions are the same for most jobs.
D)workers have more-or-less equal skills.
E)there is only a single national labour market.

Question 18

Labour-market discrimination results in a

A)lower supply in discriminating occupations and a higher supply in non -discriminating occupations.
B)higher supply in discriminating occupations and a lower supply in non -discriminating occupations.
C)lower supply in all occupations.
D)lower demand in all occupations.
E)higher demand in both occupations.

Question 19

All of the following are classified as human capital EXCEPT

A)education.
B)training.
C)gender.
D)health.
E)experience.

Question 20

Labour-market discrimination,which keeps one group of workers out of elite (E)occupations and limits them to ordinary (O)occupations,will have which of the following effects?

A)a decrease in supply and higher wages in the E occupations
B)more employment in the E occupations
C)a decrease in supply and lower wages in the O occupations
D)more unemployment in the E occupations
E)a decrease in supply and higher wages in the O occupation

Question 21

Suppose that a professional association strengthened the limits to entry into their profession and at the same time lengthened its required apprenticeship program.The likely effect would be that

A)the supply curve for labour would shift to the left.
B)the supply curve for labour would shift to the right.
C)both the demand and supply curves for labour would shift to the left.
D)the demand curve for labour would shift to the right.
E)there would be an increase in the quantity of labour supplied.

Question 22

To a monopsonist in a labour market,the average cost curve of labour

A)lies above the supply curve of labour.
B)lies below the supply curve of labour.
C)is the supply curve of labour,which lies below the marginal cost curve for labour.
D)is the marginal cost curve of labour when the supply curve is upward sloping.
E)coincides with the marginal cost curve of labour only below the profit -maximizing wage rate.

Question 23

Certain professions limit the number of students who are eligible to enroll in their programs in university - engineering,architecture,dentistry,and law,for example.What is the predicted effect of such a policy in each of these professions?

A)An increase in supply and a wage that is lower than it otherwise would be.
B)A reduction in supply and a wage that is lower than it otherwise would be.
C)An increase in supply and a wage that is higher than it otherwise would be.
D)A reduction in supply and a wage that is higher than it otherwise would be.
E)These professions are a relatively small portion of the labour market and so there will be no detectible change in wages.

Question 24

Suppose a labour union enters a competitive labour market and is successful in raising wages above the competitive equilibrium level.In this situation,

A)each firm in the industry will face a horizontal supply curve for labour at the union wage,up to the maximum quantity of labour that is prepared to work at that wage.
B)those workers already employed will earn a lower wage than before.
C)employment in the industry will surely increase.
D)the market supply curve for labour will be upward sloping over its entire range.
E)the number of firms in the industry will increase and the demand for labour curve will shift to the right,causing a subsequent increase in the wage.

Question 25

A profit-maximizing monopsonist in a labour market will continue to hire labour until the

A)hourly wage of the labour is equated with its marginal cost.
B)hourly wage of the labour is equated with its average cost.
C)marginal revenue product of labour equals its marginal cost.
D)marginal cost of labour equals its average revenue.
E)marginal product of labour is maximized.

Question 26

Some types of discrimination in the labour market will be limited by

A)the minimum wage.
B)entry of of discriminating firms into the market.
C)an increase in the number of individuals discriminated against.
D)the desire of firms to maximize profits.
E)greater monopoly power in the market.

Question 27

For a monopsonist in a labour market,the firmʹs MC curve for labour lies ________ the competitive supply curve for labour; just as the marginal revenue curve for a monopolist lies ________ the demand curve for its product.

A)below; below
B)below; above
C)above; above
D)above; below

Question 28

Suppose market E discriminates against one group of workers and market O does not.Unemployment in market O would result if

A)the free-market equilibrium wage in market O is below the legal minimum wage.
B)some workers are unwilling to work in E-market jobs.
C)there is no statutory minimum wage.
D)the supply curve in market O shifts to the left and wages are slow to adjust.
E)the demand curve in market O shifts to the right and wages are slow to adjust.

Question 29

Consider a monopsonistic labour market.Ten units of labour will be supplied if the wage rate is $12,and 11 units of labour will be supplied if the wage rate is $14.The marginal cost of the eleventh worker is

A)$2.
B)$12.
C)between $12 and $14.
D)$14.
E)more than $14.

Question 30

If competitive labour market E discriminates against one group of workers and market O does not,we can predict an increase in

A)employment in market E.
B)wages in market E.
C)wages in market O.
D)the welfare of the average worker.
E)economy-wide wage rates.

Question 31

If we compare the wage rate and the level of employment achieved in a competitive labour market with those in a monopsonistic labour market,the latter will generate

A)a lower level of employment and a higher wage rate.
B)a higher level of employment and a lower wage.
C)a higher level of employment and a higher wage rate.
D)a lower level of employment and a lower wage.
E)the same outcomes as in a competitive labour market.

Question 32

In the 1950s and 1960s,Arvida,Quebec,was basically a one -company town where Alcan was the sole buyer of labour services.This is a good example of

A)pure monopoly.
B)monopolistic competition.
C)oligopoly.
D)monopsony.
E)union power.

Question 33

Suppose your firm is a monopsonist hiring only one variable input.If you want to maximize profits,you will purchase that variable input up to the point where the

A)demand curve intersects the supply curve of the input.
B)MRP curve for the input intersects the marginal cost curve for the input.
C)wage rate is the highest.
D)marginal product of that input equals the price of one unit of the input.
E)cost of the input equals the profit generated by the employment of that input.

Question 34

Evidence suggests that some of the observed average female -male wage differential can be explained by

A)the nature of the jobs and differences in acquired human capital.
B)differences in the innate abilities between men and women.
C)higher marginal revenue product for female workers.
D)the labour-force participation rate of adult women being above that of adult men.
E)None of the above can explain part of the wage differentials.

Question 35

For a monopsonist that faces an upward-sloping labour supply curve,the marginal cost of labour curve will be ________ the supply curve because ________.

A)below; the increased wage necessary to attract an extra worker is paid to that worker alone
B)above; the increased wage necessary to attract an extra worker must be paid to everyone already employed
C)above; the average wage exceeds the marginal wage when the average wage is rising
D)the same as; the marginal cost of labour equals the average cost of labour
E)below; the extra labour supplied is less capable than previous units of labour supplied

Question 36

Certain professions limit the number of students who are eligible to enroll in their programs in university - engineering,architecture,dentistry,and law,for example.Other things being equal,what is one predicted effect of such restrictions?

A)increased wages across all segments of the labour market
B)decreased wages across all segments of the labour market
C)decreased wages in the labour market outside of these professions
D)increased wages in the labour market outside of these professions
E)there will be no effect on any wages

Question 37

As a seller of labour services,a labour union is a form of

A)monopoly.
B)monopsony.
C)oligopoly.
D)monopolistic competitor.
E)illegal cartel.

Question 38

If there is only a single buyer in the labour market,that buyer is called

A)a monopolist.
B)a monopsonist.
C)an oligopolist.
D)an oligopsonist.
E)a single-product firm.

Question 39

A labour union can most easily raise the wages received by its members by

A)increasing the demand for the product.
B)decreasing the supply of labour from its members.
C)raising employment.
D)increasing the demand for labour.
E)improving productivity.

Question 40

The following statements describe the adverse effects suffered by groups subject to labour -market discrimination.Which of the statements is false?

A)They will be more likely to experience spells of unemployment.
B)Their childrenʹs ability and willingness to invest in human capital will be less on average than those of children of other groups.
C)They will receive lower wages on average than other groups.
D)Their human capital will increase.
E)The discriminatory wage differentials will persist as long as the discrimination exists.

Question 41

Unions currently represent ________ employed workers in Canada.

A)all of the
B)half of the
C)more than 50% of
D)approximately 30% of
E)less than 10% of

Question 42

An important unanswered question about the role of unions in developed economies is whether the presence of unions affects long-run productivity.There is some evidence to suggest that the presence of a union

A)increases the human capital of unionized workers,which leads to increased long -run productivity for the firm.
B)reduces the demand for labour and therefore the demand for physical capital.
C)decreases the human capital of unionized workers,and therefore reduces long -run productivity.
D)reduces the level of employment (because of the union-wage premium)and thus raises the marginal product of labour.
E)reduces the expected profitability of installed capital and therefore leads to reduced capital investment by firms.

Question 43

The average union wage premium in Canada is

A)less than 10%.
B)between 10 and 15%.
C)between 15 and 30%.
D)between 30 and 50%.
E)more than 50%.

Question 44

Consider a small,remote town with only one employer - a gold mining company.Suppose the current work force is 875 workers,each of whom is paid $6000 per month.In order to attract one additional worker,the employer must increase the wage to $6025 per month.The marginal cost of this additional worker is

A)$21 875 per month.
B)$21 900 per month.
C)$27 900 per month.
D)$5.25 million per month.
E)$5.28 million per month.

Question 45

One of the most unionized industries in Canada is

A)agriculture.
B)finance and insurance.
C)real estate.
D)education.
E)non-governmental administrative services.

Question 46

When studying income distribution,the Classical economists were primarily concerned with the distribution of income among

A)workers and the government.
B)workers and capitalists.
C)the government and capitalists.
D)workers and landowners.
E)workers,capitalists,and landowners.

Question 47

Canadian studies on the effects of minimum-wage laws

A)suggest that they have no effect whatsoever on employment.
B)support the evidence from the United States that these laws increase wages and employment.
C)support the theoretical predictions that minimum-wage laws increase employment.
D)find that employment increases with increases in minimum wages,thus supporting the argument that labour markets are monopsonistic.
E)find that they decrease the level of employment,particularly for low -skilled workers.

Question 48

Which of the following statements about minimum-wage laws is most accurate?

A)All Canadian provinces have the same minimum wage.
B)There is some evidence that minimum-wage laws cause additional unemployment,particularly among youths.
C)Minimum-wage laws only affect the income of the higher-skilled,lowest-wage workers.
D)Minimum-wage laws are unfair.
E)There is some evidence that minimum-wage laws create a lot of jobs,particularly among youths.

Question 49

The ʺsize distribution of incomeʺ refers to the distribution of income

A)among different households with reference to the source of the income.
B)between capitalists and workers.
C)between capitalists and landowners.
D)among different individuals without reference to the source of the income.
E)to a particular factor of production in different time periods.

Question 50

Consider a wage-setting union in an otherwise competitive labour market.If the union sets a wage above the competitive level,the effect will be

A)to raise wages for all workers who wish to work in the industry.
B)to increase the amount of employment in the industry.
C)to create a group of workers who would like to obtain jobs in the industry but cannot do so.
D)a level of employment which is the same as that at the competitive equilibrium wage.
E)to cause the labour supply curve to shift to the right.

Question 51

Consider a monopsonistic labour market.One hundred units of labour will be supplied if the wage rate is $12,and 101 units of labour will be supplied if the wage rate is $14.The marginal cost of the 101st worker is

A)$14.
B)$140.
C)$214.
D)$1414.
E)Not enough information to know.

Question 52

Suppose that a regional health authority is the only employer of nurses,and further,suppose that nurses are not unionized.The 625 currently employed nurses are paid $27 per hour.To attract an additional nurse,the employer must increase the wage to $28 per hour.The marginal cost of this additional worker is

A)$653.
B)$28.
C)$17 500.
D)$17 528.
E)$27.

Question 53

The union wage premium refers to the

A)portion of a union wage attributable to fees payable to the union.
B)trade-off the union faces between the level of the wage and the size of the union.
C)higher wage attributable only to the union status of the job.
D)wage that a union is able to set unilaterally.
E)wage that an employer is able to set unilaterally.

Question 54

Unions currently represent ________ government employees in Canada.

A)all of the
B)approximately half of the
C)over 70% of
D)less than 30% of
E)less than 10% of

Question 55

If a union succeeds in shifting the labour supply curve to the left,it can achieve wages above the

A)competitive level and all workers will gain.
B)equilibrium level and an increase in employment.
C)equilibrium level without affecting employment.
D)competitive level but will reduce the level of employment.
E)competitive level without a pool of unemployed workers seeking to work at the higher wage.

Question 56

Suppose we have a labour market with a monopsony employer in a town.Now suppose that all workers form a union and negotiate a wage with the employer.We refer to this as a situation of

A)double monopsony.
B)collective bargaining.
C)union-wage premium.
D)bilateral monopoly.
E)monopsony.

Question 57

The purpose of a labour union is to

A)maintain a minimum level of employment.
B)exploit its labour-market power in the same way a monopolist exploits its market power in product markets.
C)exploit its labour-market power in the same way a monopolist exploits its market power in labour markets.
D)increase employment in its industry.
E)decrease employment in its industry.

Question 58

The ʺfunctional distribution of incomeʺ refers to the distribution of income

A)among the various social classes.
B)among the major factors of production.
C)among the industrial nations.
D)between the government and the factors of production.
E)between the various economic sectors of a country.

Question 59

The fundamental dilemma facing labour unions is

A)job security versus worker safety.
B)wage increases versus employment growth.
C)wage increases versus publicly provided pensions.
D)membersʹ roles as workers versus their roles as consumers.
E)ʺfeatherbeddingʺ versus the union-wage premium.

Question 60

If a wage-setting union enters a monopsonistic labour market,the union can cause

A)wages to rise to what would have been the competitive level but no higher.
B)wages to rise above the level set by the monopsonist,but only if it allows employment to fall below the level set by the monopsonist.
C)both wages and employment to rise over the monopsonistic level.
D)wages or employment to rise above the level set by the monopsonist,but not both.
E)the level of non-wage benefits to rise but cannot affect either wages or employment.

Question 61

Median family income (pre-tax)in Canada in 2012 was closest to

A)$45 000.
B)$52 000.
C)$65 000.
D)$82 000.
E)$95 000.

Question 62

If Canadaʹs Lorenz curve began changing such that it bends further from the diagonal line and becomes more curved,this would be an indication that

A)data collection on Canadian household incomes is improving.
B)the distribution of income in Canada is becoming more unequal.
C)the distribution of income in Canada is becoming more equal.
D)average Canadian family income is rising.
E)average Canadian family income is falling.

Question 63

A Lorenz curve showing the current distribution of pre-tax income in Canada is not an entirely accurate depiction of Canadian income distribution because

A)Statistics Canada does not actually collect data on Canadian household income.
B)Canadaʹs tax-and-transfer system reduces income inequality,which causes the Lorenz curve to be flatter and closer to the diagonal than the pre-tax curve.
C)the data collected on Canadian income distribution does not allow for an accurate plotting of a Lorenz curve.
D)a Lorenz curve cannot depict the distribution of income after government transfer payments have been distributed to households.
E)a Lorenz curve cannot depict the distribution of after -tax income.

Question 64

Much attention is being paid to the issue of rising income inequality.A serious aspect of this issue,especially in the United States and the United Kingdom ,is that even though average per capita income has been growing,

A)a larger proportion of households fall below the poverty line.
B)high-income earners are paying much higher rates of income tax.
C)the vast majority of the economyʹs total income growth has accrued to the highest income earners.
D)low- and middle-class households are not earning enough income to pay income tax.
E)incomes in these countries are not growing as fast as in other OECD countries.

Question 65

A Lorenz curve shows the

A)degree of inequality across households in the distribution of income.
B)ratio of workersʹ income to capitalistsʹ income.
C)level of a countryʹs income relative to its productive capacity.
D)level of a countryʹs income relative to its foreign trade.
E)functional distribution of income.

Question 66

In a Lorenz curve diagram,the size of the area between the Lorenz curve and the diagonal line represents

A)the degree of inequality in the distribution of income.
B)the percentage of income received by the bottom 20% of families.
C)the dollar incomes of the bottom 40% of families.
D)the percentage of income received by the top 5% of families.
E)complete income equality.

Question 67

The diagonal line on a Lorenz curve diagram represents

A)the degree of inequality in the distribution of income.
B)the percentage of income received by the bottom 50% of families.
C)the dollar incomes of the bottom 50% of families.
D)the percentage of income received by the top 50% of families.
E)where the Lorenz curve would be if there were complete income equality.