Deck 17: Wage Determination

Question 1

Right-to-work laws in some states prohibit the closed-shop and agency-shop union setups.

Answer 1

True

Question 2

Noncompeting groups of workers are the result of geographic immobility.

Answer 2

False

Question 3

A labor union may engage in a lockout if the collective bargaining process breaks down.

Answer 3

False

Question 4

Efficiency wages are established at below-equilibrium levels.

Question 5

One clear effect of labor unions is an increase in the wage rates of their members.

Question 6

Inclusive unions restrict the number of jobs directly by shifting the labor supply curve to the left; exclusive unions restrict the number of jobs by imposing above-equilibrium wage rates on the employer.

Question 7

Human capital investment refers to spending on education and worker training.

Question 8

The rising general level of real wages in the United States has occurred because the growing population has increased the supply of labor relative to the demand for it.

Question 9

A monopsonistic employer may sell its product in a competitive market.

Question 10

The monopsonist in a nonunionized labor market pays a wage rate below the MRP of labor.

Question 11

Marginal resource (labor)cost will always exceed the wage rate when the employer is selling its product in an imperfectly competitive market.

Question 12

Union membership among workers in America has been declining since the 1950s.

Question 13

Shirking refers to the behavior of workers who provide less-than-expected effort on the job.

Question 14

In 2018, food workers had a much higher unionization rate than teachers, according to U.S. Bureau of Labor Statistics data.

Question 15

Commissions or royalties may be an inexpensive way of reducing shirking on a job when the costs of monitoring work performance are high.

Question 16

Piece-rates may not be appropriate pay in some situations because they might reduce product quality.

Question 17

Industrial unions are more likely to increase wage rates by restricting the supply of labor than are craft unions.

Question 18

Critics of the minimum wage contend that higher minimums cause employers to move up their labor demand curves, reducing employment of low-wage workers.

Question 19

The principal-agent problem in labor markets arises because of the possibility of shirking by workers.

Question 20

The labor supply curve facing a purely competitive firm is perfectly inelastic.

Question 21

In a purely competitive labor market, an individual firm must pay a rising price for labor if it wants to acquire more labor.

Question 22

The rate of unionization is substantially higher for protective service workers than for sales workers.

Question 23

Union workers have higher rates of job turnover than do nonunion workers.

Question 24

Nominal wage measures the purchasing power of a given amount of real wage.

Question 25

Unions prefer agency shops to open shops.

Question 26

There is no evidence that unions are able to increase wage rates above those that the market would otherwise provide.

Question 27

One reason for the high wage rates in the United States and other advanced economies is the high productivity of labor in these countries.

Question 28

A monopsonist faces an upsloping supply curve of labor, but it could face a horizontal demand curve for its product in the output market.

Question 29

The presence of an agency shop requires all workers to join the union within the first 30 days of employment.

Question 30

In 2018, approximately 5 percent of all work time lost was due to work stoppages.

Question 31

Right-to-work laws prohibit the formation of labor unions.

Question 32

Since the mid-1950s, union membership has declined as a percentage of employed wage and salary workers.

Question 33

A monopsonist in the labor market tends to hire more workers than would be hired if the labor market were purely competitive.

Question 34

In a purely competitive labor market, a profit-maximizing firm will hire labor up to the point where the marginal resource cost equals the wage rate.

Question 35

If a firm must pay a daily wage of $35 to hire 11 workers and a daily wage of $40 to hire 12 workers, its marginal resource cost of hiring the 12th worker is $40.

Question 36

African Americans have higher unionization rates than whites.

Question 37

Seven of the 50 states account for approximately half of all union members in the United States.

Question 38

If you received a 4 percent increase in your nominal wage and the price level increased by 6 percent, then your real wage has increased by 2 percent.

Question 39

A monopsonist in equilibrium will hire labor at a level where MRP = MRC > W.

Question 40

The supply curve of labor faced by an individual firm in a purely competitive labor market is horizontal.

Question 41

Education is a form of human capital, and it helps explain wage differentials.

Question 42

Professions that require their practitioners to pass a licensure exam, like accountants and doctors, exemplify the exclusive union model of how a labor union raises wage rates.

Question 43

A bilateral monopoly case is a situation where a firm is a monopolist in its product market and is also a monopsonist in the market where it acquires its major resource.

Question 44

If the nominal wage rises by 6 percent and the price level falls by 2 percent, the real wage will

A)be unaffected.
B)rise by 4 percent.
C)rise by 8 percent.
D)fall by 4 percent.

Question 45

In the demand-enhancing union model, a union tries to increase the wage rate through actions such as promoting the industry's product or raising labor productivity.

Question 46

If the nominal wages of carpenters rose by 3 percent in 2019 and the price level decreased by 4 percent, then the real wages of carpenters

A)decreased by 1 percent.
B)increased by 7 percent.
C)increased by 1 percent.
D)increased by 4 percent.

Question 47

There will be no principal-agent problem if a firm's owner (like a business consultant)does all the work of the firm.

Question 48

An example of a monopsonist is a labor union whose members include all the workers in a particular industry.

Question 49

Restricting the supply of labor is a means of increasing wage rates more commonly used by industrial unions than craft unions.

Question 50

If the nominal wages of carpenters rose by 1 percent in 2019 and the price level increased by 4 percent, then the real wages of carpenters

A)decreased by 4 percent.
B)decreased by 3 percent.
C)increased by 3 percent.
D)increased by 5 percent.

Question 51

Wage differentials are fully explained by differences in productivity and human capital among various workers.

Question 52

A bilateral monopoly case is a situation where two monopolists in two countries are selling competing products in the world market.

Question 53

In monopsony situations, a minimum wage might increase wage and employment levels.

Question 54

If the nominal wage rises by 8 percent and the price level falls by 2 percent, the real wage will

A)be unaffected.
B)fall by 6 percent.
C)rise by 10 percent.
D)rise by 6 percent.

Question 55

Firms that pay efficiency wages tend to have higher worker turnover.

Question 56

Minimum wage laws have contributed to higher unemployment levels among teenagers and minorities.

Question 57

If the price level rises by 4 percent in a year and nominal wages increase by 2 percent, then real wages will

A)decrease by 6 percent.
B)decrease by 4 percent.
C)decrease by 2 percent.
D)increase by 2 percent.

Question 58

Assume that your nominal wage was fixed at $12 an hour, and the price index rose from 102 to 105. In this case, your real wage has

A)decreased to $11.76.
B)increased to $11.76.
C)decreased to $11.43.
D)increased to $11.43.

Question 59

The consumer price index is 125 in Year 1 and 132 in Year 2. The nominal wage rate is $15 in Year 1 and $17 in Year 2. What is the approximate percentage change in the real wage rate from Year 1 to Year 2?

A)2.4 percent
B)13.3 percent
C)5.6 percent
D)7.7 percent

Question 60

The consumer price index is 132 in Year 1 and 125 in Year 2. The nominal wage rate is $31 in Year 1 and $30 in Year 2. What is the approximate percentage change in the real wage rate from Year 1 to Year 2?

A)-5.3 percent
B)6 percent
C)-3.2 percent
D)2.1 percent

Question 61

A firm operating in a purely competitive labor market has the marginal revenue product schedule shown in the table. If the wage rate decreases from $19 to $13, by how much will the firm expand employment?

A)5 workers
B)4 workers
C)2 workers
D)3 workers

Question 62

Refer to the given data. If the market wage rate is $8 and the firm hires its profit-maximizing number of workers, the firm's total wage bill (payment)will be

A)$24.
B)$32.
C)$16.
D)$40.

Question 63

Refer to the given data. We can conclude from the information given that this firm is a

A)pure monopolist.
B)discriminating monopolist.
C)pure competitor.
D)monopolistic competitor.

Question 64

Refer to the given data. If this firm can hire as few or many workers as it wants at $9, it is

A)hiring labor in a monopsony labor market.
B)hiring labor in a purely competitive labor market.
C)selling its product in a monopolized product market.
D)selling its product in a purely competitive product market.

Question 65

Refer to the given data. The marginal revenue product of the second worker is

A)$9.
B)$24.
C)$12.
D)$8.

Question 66

Refer to the given data. The marginal revenue product of the fourth worker is

A)$4.
B)$2.
C)$8.
D)$52.

Question 67

A firm's labor input, total output of labor, and product price schedules are given in the table. Labor is the only variable input. How many workers will the profit-maximizing firm hire if the wage rate is $15 per day?

A)3
B)4
C)6
D)5

Question 68

Refer to the given data. This firm's product price is

A)$8.
B)$4.
C)$3.
D)$12.

Question 69

Refer to the given data. If the market wage rate is $14, this firm will employ

A)2 workers.
B)4 workers.
C)3 workers.
D)5 workers.

Question 70

Refer to the given data. In maximizing its profit, this firm will employ

A)1 unit of labor.
B)2 units of labor.
C)3 units of labor.
D)4 units of labor.

Question 71

Nominal monthly wages increase from $1,200 to $1,300, while the price level decreases by 2 percent. The percentage change in real monthly wages is about

A)2 percent.
B)-2 percent.
C)8.3 percent.
D)10.3 percent.

Question 72

The nominal annual wage increases from $25,000 to $27,000, while the price level increases by 6 percent. In this case, the percentage change in the real annual wage is about

A)8 percent.
B)10 percent.
C)14 percent.
D)2 percent.

Question 73

A firm's labor input, total output of labor, and product price schedules are given in the table. Labor is the only variable input. How many workers will the profit-maximizing firm hire if the wage rate is $0.5 per day?

A)4
B)5
C)7
D)6

Question 74

The table shows labor demand data on the left and labor supply data on the right. The firm will maximize profits (or minimize losses)by employing

A)2 workers.
B)4 workers.
C)5 workers.
D)3 workers.

Question 75

Refer to the given data. At the profit-maximizing level of employment, this firm's total revenue will be

A)$48.
B)$12.
C)$36.
D)$24.

Question 76

A firm's labor input, total output of labor, and product price schedules are given in the table. Labor is the only variable input. What is the marginal revenue product of the fifth worker?

A)$5
B)$25
C)$-7
D)$1

Question 77

Refer to the given data. At the profit-maximizing level of employment, this firm's total labor cost will be

A)$10.
B)$20.
C)$22.
D)$28.

Question 78

Refer to the given data. If the market wage rate is $5 and the firm hires its profit-maximizing number of workers, the firm's total revenue will exceed its total wage payment by

A)$70.
B)$25.
C)$45.
D)$15.

Question 79

Refer to the given data. If there is neither a union nor a minimum wage, we can conclude that this firm

A)"purchases" labor in a purely competitive labor market.
B)is a monopsonist.
C)faces a perfectly inelastic labor supply curve.
D)has a perfectly elastic labor demand curve.

Question 80

A firm's labor input, total output of labor, and product price schedules are given in the table. Labor is the only variable input. What is the marginal revenue product of the seventh worker?

A)$35
B)$4
C)$5
D)$-7