Deck 12: Labor Markets and Labor Unions

Question 1

In what three ways do people use their time?

A)market work, selling labor in the labor market, and leisure
B)producing their own goods and services, nonmarket work, and market work
C)nonwork, work, and leisure
D)market work, nonmarket work, and leisure
E)market work, nonwork, and leisure

Answer 1

D

Question 2

If Dian chooses a job with a lower income over one with a higher income,she cannot be maximizing utility.

Answer 2

False

Question 3

Jamal maximizes utility by allocating his time among leisure, market work,and household work so that

A)expected marginal utility is equal among all three
B)expected total utility per hour is equal among all three
C)expected marginal utility per hour is equal among all three
D)the maximum amount of goods and services can be acquired
E)expected total utility of each use is equal

Answer 3

C

Question 4

Leisure is

A)not subject to the law of diminishing utility because you can never have enough leisure time
B)not subject to the law of diminishing utility because you can derive utility only from goods and services
C)subject to the law of diminishing utility, just as the consumption of goods and services is
D)subject to the law of diminishing utility only if it involves the consumption of goods and services
E)not considered in maximizing utility

Question 5

The amount of time an individual is willing to offer for a wage depends onthe

A)all of the following
B)value of time devoted to leisure activities
C)boredom, discomfort, and aggravation associated with work
D)value of time devoted to nonmarket work
E)satisfaction gained from goods purchased with the wages

Question 6

Every individual has a labor supply curve in each market where there is apossible use for his/her labor.

Question 7

Which of the following is not a form of nonmarket work?

A)working on your car at home
B)doing your laundry in a laundromat
C)making bread for a dinner at your sister's house
D)caring for your sister's children as a favor
E)babysitting for a fee

Question 8

People make mistakes in allocating their time

A)because they always act irrationally
B)despite always having expectations fulfilled
C)only when leisure is a normal good
D)because acquiring information is costly
E)more often when the cost of making a mistake is high

Question 9

The quantity of labor an individual supplies to any market

A)always increases as the market wage rate rises
B)is contingent upon the wage rates offered in other labor markets
C)always decreases as the market wage rate rises
D)could never be zero over the realistic range of wage rates
E)depends only on the opportunity cost of the individual's time in other labor markets

Question 10

Jason can maximize his satisfaction by allocating time among market work,nonmarket work, and leisure so that the final marginal utilities per hourspent in each activity are identical.

Question 11

A worker's labor supply depends on, among other things, his ability, hispreference for the task, and the opportunity cost of his time.

Question 12

Abby maximizes utility by allocating time among leisure, market work, andnonmarket work so that the

A)total utility of each is equal
B)average utility of each is equal
C)total utility per hour of each is equal
D)marginal utility per hour of each is equal
E)maximum amount of goods and services can be acquired

Question 13

An extra hour of market work is an attractive use of your time

A)because of the utility generated by goods made possible through the extra work
B)solely because of the personal satisfaction it generates
C)when the disutility of income generated by the extra work exceeds the utility
D)when the net utility of the extra goods made possible and the extra work is greater than zero
E)only when you do not enjoy leisure time

Question 14

The amount of time an individual is willing to sell on the labor marketvaries positively with the value of leisure time.

Question 15

Leisure is

A)subject to the law of diminishing marginal utility
B)usually considered an inferior good
C)a complementary good with nonmarket work
D)a complementary good with market work
E)an irrational way to spend valuable time

Question 16

As the wage rate increases, the income effect tends to reduce the quantityof labor supplied to the market.

Question 17

Leisure time is not subject to diminishing marginal utility.

Question 18

A consumer maximizes utility by allocating time so that the expectedmarginal utilities of the last unit of time spent in each activity are identical.

Question 19

Nonmarket work includes time spent

A)producing goods and services for your employer
B)pursuing hobbies and crafts
C)engaging in strenuous physical exercise to reduce your weight
D)producing your own goods and services
E)managing your own firm

Question 20

If the quantity of labor Sam supplies to a job is zero over the realistic rangeof wages, Sam

A)is either unwilling or unable to perform the job
B)has not been hired to do the job
C)has not been hired to do the job at the going market wage rate
D)is unable to perform the job
E)is unwilling to perform the job

Question 21

As the wage rate increases, the substitution effect causes workers to supplymore time to market work and the income effect causes them to supply lesstime to market work.

Question 22

People who are more productive in market work

A)produce less for themselves
B)spend more time engaged in nonmarket work
C)work fewer hours in market work and enjoy more leisure
D)are more likely to acquire skills and education through nonmarket work
E)are attracted to market employment at lower wages

Question 23

A college student working in a minimum­wage job has a __________opportunity cost of __________ than a college dean.

A)lower; market work
B)lower; leisure
C)higher; market work
D)higher; nonmarket work
E)higher; leisure

Question 24

If nonmarket work is a normal good, then an increase in income __________the time allocated to __________.

A)decreases; market work
B)decreases; leisure
C)increases; market work
D)increases; leisure
E)increases; nonmarket work

Question 25

The demand for labor curve bends backward whenever the income andsubstitution effects work in opposite directions.

Question 26

If Marie buys a sailboat, which increases the productivity of her leisuretime, she

A)increases her productivity of nonmarket work
B)increases her productivity of market work
C)will spend less time in nonmarket work
D)will spend less time in leisure activities
E)will spend more time in market work to pay for the boat's maintenance

Question 27

Because leisure is a normal good, an increase in income

A)decreases the demand for leisure time and reduces the amount of time allocated to market work
B)decreases the demand for leisure time and increases the amount of time allocated to market work and/or
Nonmarket work
C)increases the demand for leisure time and reduces the amount of time allocated to market work and
Nonmarket work
D)increases the demand for leisure time and increases the amount of time allocated to market work and
Nonmarket work
E)has no impact on the demand for leisure time

Question 28

If Jin­Ho buys a personal computer to maintain household financial recordsand prepare budgets, he

A)will spend less time in nonmarket work
B)will spend more time engaged in leisure activities
C)will increase the productivity of market work
D)is less likely to hire tax preparation services on the market
E)is less likely to prepare his own income tax returns at home

Question 29

Which of the following would be considered leisure?

A)picking strawberries for your own use
B)running a 10­mile training session
C)studying for a college mathematics class
D)changing the oil and oil filter on your car
E)weeding your garden

Question 30

If a person's labor supply curve is positively sloped, the income effectoutweighs the substitution effect.

Question 31

The individual supply curve of labor is backward bending because thesubstitution effect offsets the income effect at higher wage rates.

Question 32

By itself, the substitution effect of an increase in the wage rate will

A)always lead to an increase in the quantity of labor supplied
B)always lead to a decrease in the quantity of labor supplied
C)lead to an increase in the quantity of labor supplied only if leisure is like a normal good
D)lead to an increase in the quantity of labor supplied only if leisure is not a normal good
E)lead to an increase in the quantity of labor supplied only if the income effect works in the same direction

Question 33

If leisure is a normal good, then a decrease in income __________ the timeallocated to __________.

A)decreases; market work
B)decreases; leisure
C)decreases; nonmarket work
D)increases; leisure
E)increases; market work, nonmarket work, and leisure time

Question 34

People who can earn higher market wages, other things constant, will

A)provide more labor to nonmarket work
B)be more inclined to supply their labor to market work than to nonmarket work
C)be more inclined to supply their labor to nonmarket work than to market work
D)provide more labor to nonmarket work even if the market can provide the services more cheaply
E)provide less labor to market work and more labor to nonmarket work

Question 35

A newly acquired microwave oven and a food processor will increaseChuck's productivity in the kitchen.Accordingly, he will

A)cook more and eat out less
B)cook less and eat out more
C)buy more ready­to­eat foods
D)be more likely to hire a cook
E)increase the quality of what he cooks but may or may not cook more

Question 36

People who can earn higher market wages

A)have a greater net utility associated with nonmarket work
B)supply more hours to market work than people with lower wages
C)are less likely to perform nonmarket work
D)are more likely to view leisure as an inferior good
E)experience less disutility associated with market work

Question 37

If the substitution effect dominates the income effect, then an increase inthe wage rate will increase the quantity of labor supplied by an individual.

Question 38

People make mistakes in allocating their time

A)only when leisure time is an inferior good
B)because expectations are not always fulfilled
C)more often when the cost of making a mistake is high
D)only when economists remove the assumption that individuals are rational
E)because information is free and readily available

Question 39

A college dean has a __________ opportunity cost of __________ than acollege student working in a minimum­wage job.

A)lower; leisure
B)lower; nonmarket work
C)lower; market work
D)higher; nonmarket work
E)higher; market work

Question 40

People who gain greater enjoyment from leisure activities

A)allocate more time to leisure
B)allocate more time to market work
C)allocate more time to nonmarket work
D)generally earn higher market wages
E)generally earn lower market wages

Question 41

In Exhibit 12­2, which of the following is true at a wage rate of $20?

A)The income effect dominates the substitution effect.
B)The substitution effect dominates the income effect.
C)No labor is supplied.
D)The income effect equals the substitution effect.
E)The supply curve is horizontal.

Question 42

Along a backward­bending labor supply curve, the

A)income effect always dominates the substitution effect
B)substitution effect always dominates the income effect
C)substitution effect is always equal to the income effect
D)substitution effect dominates the income effect at high wage rates
E)substitution effect dominates the income effect at low wage rates

Question 43

Which of the following suggests that people have no control over thenumber of hours they work?

A)Most workdays last from 8 a.m.to 5 p.m.
B)People make use of the opportunity for overtime.
C)People make use of the opportunity to moonlight.
D)People make use of early retirement options.
E)Many workers hold more than one job.

Question 44

As the wage rate falls, a utility­maximizing individual's quantity of laborsupplied

A)increases
B)decreases
C)increases if the income effect outweighs the substitution effect
D)decreases if the substitution effect outweighs the income effect
E)decreases if the income effect outweighs the substitution effect

Question 45

The income effect of a decrease in the wage rate causes the quantity oflabor supplied to

A)increase
B)increase only if the individual desires more leisure time
C)increase only if the substitution effect outweighs the income effect
D)decrease
E)decrease only if the substitution effect is weaker than the income effect

Question 46

. In Exhibit 12­4, when the wage rate rises above $12, the substitution effectoutweighs the income effect.

Question 47

As the wage rate decreases, the amount of time spent on market workusually

A)increases because the opportunity cost of nonmarket work increases
B)increases because of the substitution effect
C)decreases because of the income effect
D)decreases because the value of leisure time increases
E)decreases because the opportunity cost of leisure declines

Question 48

The average work week in the United States has declined to fewer than 40hours even though wage rates have been increasing.The best explanation ofthis phenomenon is that

A)the labor supply curve shifted to the right
B)the labor demand curve shifted to the right
C)the income effect of rising wages outweighed the substitution effect
D)the income effect of rising wages could not outweigh the substitution effect
E)none of the above

Question 49

At a low wage rate,

A)there is no substitution effect
B)there is no income effect
C)the substitution effect usually outweighs the income effect
D)the income effect usually outweighs the substitution effect
E)the disutility of market work is usually high

Question 50

) In Exhibit 12­4, how much will the employer have to pay per hour to get thisworker to work 48 hours per week?

A)$6
B)$7
C)$9
D)$12
E)less than $12

Question 51

) In Exhibit 12­3, which of the following is true when the wage rate increasesfrom $9 to $11?

A)The substitution effect will cause the person to work more hours.
B)The income effect will cause the person to work more hours.
C)The substitution effect will cause the person to work fewer hours.
D)The income effect will cause the person to work the same number of hours.
E)The substitution effect will cause the person to work the same number of hours.

Question 52

For a typical person who is currently earning a low wage rate, the

A)substitution effect of a wage rate increase usually is stronger than the income effect
B)substitution effect of a wage rate increase usually is weaker than the income effect
C)income effect of a wage rate increase is usually zero
D)substitution effect of a wage rate increase is usually zero
E)substitution and income effects of a wage rate increase tend to work in the same direction

Question 53

The income and substitution effects of a change in the wage rate

A)always work in the same direction
B)always work in opposite directions
C)work in opposite directions only if the change is a decrease
D)work in the same direction only if the change is an increase
E)work in the same direction only if the change is a decrease

Question 54

Exhibit 12­3 In Exhibit 12­3, which of the following is true when the wage rate increasesfrom $11 to $13?

A)The substitution effect will cause the person to work more hours.
B)The income effect will cause the person to work more hours.
C)The substitution effect will cause the person to work fewer hours.
D)The income effect will cause the person to work the same number of hours.
E)The substitution effect will cause the person to work the same number of hours.

Question 55

. In Exhibit 12­4, when the wage rate increases from $9 to $12, thesubstitution effect outweighs the income effect.

Question 56

Along which part of the labor supply curve in Exhibit 12­1 does thesubstitution effect of a wage change outweigh the income effect?

A)between points a and b
B)between points a and c
C)between points b and c
D)between points b and d
E)between points c and d

Question 57

The substitution effect of a decrease in the wage rate causes the quantity oflabor supplied to

A)increase
B)increase only if the individual desires more leisure time
C)increase only if the substitution effect outweighs the income effect
D)decrease
E)decrease only if the individual lowers the value of leisure time

Question 58

Which of the following statements regarding labor supply is false?

A)Jerry's labor supply curve can bend backward if the income effect of a higher wage rate outweighs the
Substitution effect.
B)Bob's labor supply curve will not bend backward if the wage rate is never so high that the income effect
Outweighs the substitution effect.
C)If there is a wage rate above which the income effect is at least as great as the substitution effect, the
Labor supply curve will be vertical or bend backward.
D)The labor supply curve will slope upward if the income effect dominates the substitution effect.
E)Hayden's offer to work more hours as the result of a wage increase suggests that the substitution effect
Dominates the income effect.

Question 59

If the substitution effect is always greater than the income effect, then anindividual's labor supply curve will

A)bend backward
B)always have a positive slope
C)always have a negative slope
D)be vertical
E)be horizontal

Question 60

Exhibit 12­2 In Exhibit 12­2, which of the following is true if the wage rate decreasesfrom $14 to $6 per hour?

A)The income effect dominates the substitution effect.
B)The substitution effect dominates the income effect.
C)No labor is supplied.
D)The income effect equals the substitution effect.
E)The supply curve is horizontal.

Question 61

Bob and Mary each have a Ph.D.in economics.Bob has a job in privateindustry at which he earns $90,000 a year.Mary earns half that much as acollege professor.Which of the following could not explain Mary's careerchoice?

A)She experiences diminishing marginal utility.
B)She enjoys the flexibility of her schedule.
C)She enjoys teaching.
D)She enjoys the informal atmosphere of a college.
E)She likes having her summers free to do research.

Question 62

Jobs in rural areas generally pay lower wages than jobs in urban areasbecause there are limits to labor mobility.

Question 63

)A stock market crash that reduces the value of an individual's trust fundwould tend to

A)increase her supply of labor if the substitution effect outweighs the income effect
B)decrease her supply of labor if the substitution effect outweighs the income effect
C)have no impact on her labor supply decision
D)increase her supply of labor
E)decrease her supply of labor

Question 64

A large inheritance from a relative will tend to

A)cause movement up and to the right along your labor supply curve
B)cause movement down and to the left along your labor supply curve
C)shift your labor supply curve outward
D)shift your labor supply curve inward
E)make the income effect of a wage increase positive

Question 65

Which of the following could not contribute to differences in wage ratesacross markets?

A)differences in training and education requirements
B)job discrimination
C)differences in risk
D)problems of labor mobility
E)distribution of a new national help­wanted newspaper

Question 66

Sharon wants a career as an accountant.During the summer she turns downa job painting houses at $6 an hour to work in an accounting office for $4 anhour.Which of the following would not explain her choice?

A)Accounting is more prestigious.
B)The summer accounting job will help her get a full­ time job in accounting when she graduates.
C)She prefers to work inside.
D)She would face the law of diminishing marginal utility if she had more goods.
E)She dislikes the messiness of painting.

Question 67

Which of the following would reduce the supply of an athletic trainer'sservices at today's wage rate, other things constant?

A)a reduction in the individual's income from other sources
B)an improvement in the quality of the work environment
C)an increase in the amount of control the trainer has over the use of time on the job
D)a trainer's future earning possibilities go down due to a new negative image associated with this work
E)an increase in the trainer's preference for this type of work

Question 68

Other things equal, the wage rate will be higher in a job that requires closemonitoring by a supervisor since few individuals are eager to work in suchan environment.

Question 69

The market labor supply curve is usually __________ over the relevantrange of market wage rates.

A)positively sloped
B)negatively sloped
C)backward bending
D)vertical
E)horizontal

Question 70

An increase in the wage rate will decrease the demand for labor.

Question 71

College students often spend summers in internships that pay little or noincome because internships provide benefits in the form of higher futureincomes.

Question 72

Jobs that pay higher salaries must be riskier than lower­paying professions.

Question 73

A person who wins a large sum of money in the state lottery is likely to

A)increase the amount of market work offered at each wage rate
B)not change the amount of work offered at each wage rate
C)decrease the amount of work offered at each wage rate
D)substitute market work for leisure time due to the substitution effect
E)substitute market work for leisure time due to the income effect

Question 74

The market labor supply curve is

A)the sum of individual labor supply curves at each quantity of labor
B)the sum of individual labor supply curves at each wage rate
C)the average of all individual labor supply curves
D)the sum of the upward­sloping portions of individual labor supply curves
E)the sum of the downward­sloping portions of individual labor supply curves

Question 75

The equilibrium wage

A)is the same in all labor markets
B)occurs where the supply of labor curve begins to bend backward
C)cannot be calculated because there are so many labor markets
D)is determined by the market demand for labor and the market supply of labor
E)is irrelevant because of unions

Question 76

Which of the following could explain an increase in demand for labor?

A)additional training that increases the productivity of each unit of labor in this market
B)an increase in the amount of risk associated with this job
C)a decrease in the amount of risk associated with this job
D)an improvement in the working conditions associated with this job
E)a decline in the working conditions associated with this job

Question 77

Which of the following could explain a decrease in the demand for labor ina particular job?

A)additional training that increases the productivity of each unit of labor in this market
B)an increase in the amount of risk associated with this job
C)a decrease in the amount of risk associated with this job
D)an improvement in the working conditions associated with this job
E)a decrease in the productivity of each unit of labor in this market

Question 78

Which of the following could explain an increase in the equilibrium wagerate for a particular job?

A)a decrease in the amount of training needed to perform this job
B)an increase in the amount of risk associated with this job
C)a decrease in the amount of risk associated with this job
D)an improvement in the working conditions associated with this job
E)increased migration of workers to this geographic location

Question 79

An increase in labor supply will increase the equilibrium wage rate.

Question 80

The market labor supply curve is the sum of

A)individual labor supply curves at each wage rate
B)the upward­sloping portions of individual labor supply curves
C)the downward­sloping portions of individual labor supply curves
D)the average of all individual labor supply curves
E)individual labor supply curves at each net utility for market work