Deck 10: Labor Markets and Income Distribution

Question 1

The marginal revenue product of a resource is:

A) the marginal product of the resource divided by the price of the product it helps to produce.
B) the price of the product times the price of the resource.
C) larger when the product price is larger.
D) larger when the marginal product is smaller.

Answer 1

C

Question 2

The labor supply curve facing an individual employer in a perfectly competitive labor market is:

A) upward sloping.
B) downward sloping.
C) horizontal.
D) the MRP curve.

Answer 2

C

Question 3

The optimal hiring rule is to employ labor up to the point where:

A) wage = MFC.
B) wage = MP.
C) wage = MR
D) wage = MRP

Answer 3

D

Question 4

Which of the following is the best example of an investment in human capital?

A) on-the-job training received by an apprentice electrician
B) an increase in the number of hours worked per week by a worker in an unskilled laboring job
C) the purchase of company stock by a worker
D) payments into a retirement pension plan by a skilled laborer

Question 5

Exhibit 10-2 Labor and output data $$\begin{array} { | c | c | } \hline \text { Labor } & \text { Output } \\\hline 0 & 0 \\1 & 20 \\2 & 45 \\3 & 80 \\4 & 100 \\5 & 110 \\\hline\end{array}$$ In Exhibit 10-2, if product price is fixed at $5, the MRP of the third worker is equal to:

A) $35.
B) $125.
C) $80.
D) $175.

Question 6

Tucker Corporation sells its product for $5.00. Tucker's industrial engineers have informed management that hiring one additional worker will increase output by five units per hour. Tucker should hire the additional worker only if the wage rate is:

A) $5.00 or less per hour.
B) $1.00 or more per hour.
C) $25.00 or less per hour.
D) more than $25.00 per hour.

Question 7

The marginal revenue product of a resource:

A) is defined as the marginal product of the resource multiplied by the resource price.
B) simply means that a firm should add to its capital stock as long as competition requires it.
C) equals the extra output produced by an additional unit of the resource multiplied by the price of that output.
D) equals the average product of the resource multiplied by the cost of hiring an additional (marginal) unit of the resource.

Question 8

A worker's accumulated investment in education, training, experience, and health is called:

A) derived labor demand.
B) collective entrepreneurship.
C) seniority.
D) human capital.

Question 9

Dividing the change in total revenue by the change in labor gives:

A) marginal product of labor.
B) marginal revenue product of labor.
C) the price of the output.
D) demand for the output.

Question 10

Exhibit 10-1 Use the information in the accompanying chart to answer the following question(s). The firm hires labor competitively and sells its product in a competitive price-taker market. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Units of Labor } \\\text { (per day) }\end{array} & \begin{array} { c } \text { Total Output } \\\text { (dollars) }\end{array} & \begin{array} { c } \text { Product } \\\text { Price }\end{array} \\\hline 1 & 15 & 6 \\2 & 30 & 6 \\3 & 40 & 6 \\4 & 48 & 6 \\5 & 54 & 6 \\6 & 59 & 6 \\7 & 62 & 6 \\\hline\end{array}$$ Refer to Exhibit 10-1. What is the marginal revenue product of the fifth unit of labor?

A) $6.
B) $36.
C) $54.
D) $324.

Question 11

Which of the following is the most accurate definition of a worker's marginal revenue product?

A) The change in the firm's profits as the result of hiring an additional worker.
B) The change in the firm's total revenue as the result of hiring an additional worker.
C) The change in the firm's output as the result of hiring an additional worker.
D) The change in the firm's cost as the result of hiring an additional worker.

Question 12

The demand for labor curve is identical to the:

A) marginal revenue curve.
B) marginal resource curve.
C) total revenue curve.
D) marginal revenue product curve.

Question 13

Exhibit 10-4 Supply and demand curves for food servers

In Exhibit 10-4, the equilibrium wage and the number of food servers employed per day, respectively, are:

A) $2.00 and 5,000.
B) $4.00 and 10,000.
C) $6.00 and 15,000
D) $8.00 and 20,000.

Question 14

One reason the supply of carpenters is greater than the supply of physicians is because:

A) carpenters demand less income.
B) physicians do not belong to a union.
C) of differences in human capital.
D) carpenters belong to unions.

Question 15

Which of the following most clearly illustrates the concept of derived demand?

A) An increase in the price of steak causes the demand for poultry to increase.
B) An increase in the demand for new houses leads to an increase in the demand for construction workers.
C) An increase in consumer income leads to an increase in the demand for services provided by the government.
D) An increase in the demand for new cars causes the demand for used automobiles to rise.

Question 16

Firms should hire additional units of a resource as long as the:

A) marginal product of the resource exceeds the price of the resource multiplied by the quantity of output produced.
B) marginal product of the resource is less than the price of the resource.
C) price of the output produced is positive.
D) marginal revenue product of the resource exceeds the cost of an additional unit of the resource.

Question 17

The marginal cost of labor for a perfectly competitive firm is given by:

A) the marginal product of labor.
B) the market wage rate.
C) its marginal revenue product curve.
D) the demand curve for labor.

Question 18

A firm's demand for labor depends on, in part, the demand for the firm's product. To summarize this idea, economists say that the demand for labor is:

A) derived demand.
B) marginal demand.
C) secondary demand.
D) monopsonistic demand.

Question 19

A firm's demand curve for labor coincides with the:

A) marginal cost curve.
B) average cost curve.
C) marginal revenue curve.
D) marginal revenue product curve.

Question 20

If a product's price increases, then its:

A) MP will increase.
B) MFC will increase.
C) MRP will increase.
D) MP will decrease.

Question 21

The following chart indicates the reductions in total losses due to theft if a jewelry store hires additional security guards. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Number } \\\text { of Guards }\end{array} & \begin{array} { c } \text { Dollar Value of } \\\text { Thefts Prevented }\end{array} \\\hline 1 & 150 \\2 & 240 \\3 & 310 \\4 & 360 \\5 & 400 \\6 & 430 \\\hline\end{array}$$ If the security guards can be hired for $45 per day, how many guards should the shop hire?

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

Question 22

A competitive car wash currently hires 4 workers, who together can wash 80 cars per day. The market price of car washes is $5 per wash, and the price of workers is $60 per day. The car wash should hire a fifth worker if it would increase total production to at least:

A) 92 cars per day.
B) 100 cars per day.
C) 104 cars per day.
D) 110 cars per day.

Question 23

The demand for a factor of production depends on the:

A) supply of the factor.
B) supply of other factors of production.
C) demand for other factors of production.
D) demand for the products that it helps to produce.

Question 24

An increase in the demand for a product will shift the

A) supply of labor used to produce the product rightward.
B) supply of labor used to produce the product leftward.
C) demand for labor used to produce the product rightward.
D) demand for labor used to produce the product leftward.

Question 25

If the marginal product of labor is always positive, and  total revenue  grows with each additional worker. Firms do not continuously hire new workers because :

A) there isn't enough room in the factory.
B) there isn't an infinite number of workers.
C) wages would have to increase.
D) they stop when MRP = wage

Question 26

Exhibit 10-4 Supply and demand curves for food servers

If the equilibrium wage rate in Exhibit 10-4 increased, the cause could be that:

A) the wage increased.
B) the marginal product of labor decreased.
C) either the demand for labor increased or the supply of labor decreased.
D) the price of the product produced by the labor decreased.

Question 27

In Exhibit 10-5, at what wage rate will the firms stop hiring these workers?

A) $25.00.
B) $20.00.
C) $15.00.
D) $10.00.

Question 28

Exhibit 11-3 Labor supply curve
In Exhibit 11-3, the total wage cost of hiring 6 employees is:

A) $18 per hour.
B) $36 per hour.
C) $3 per hour.
D) $108 per hour.

Question 29

Exhibit 10-1 Use the information in the accompanying chart to answer the following question(s). The firm hires labor competitively and sells its product in a competitive price-taker market. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Units of Labor } \\\text { (per day) }\end{array} & \begin{array} { c } \text { Total Output } \\\text { (dollars) }\end{array} & \begin{array} { c } \text { Product } \\\text { Price }\end{array} \\\hline 1 & 15 & 6 \\2 & 30 & 6 \\3 & 40 & 6 \\4 & 48 & 6 \\5 & 54 & 6 \\6 & 59 & 6 \\7 & 62 & 6 \\\hline\end{array}$$ Refer to Exhibit 11-1. If the market wage rate is $25 per day, how many workers should the firm hire if it wants to maximize profits?

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

Question 30

Which of the following statements concerning the supply of labor is true ?

A) The wage rate has no effect on the quantity of labor supplied .
B) The labor supply curve is downward sloping.
C) The supply of labor is determined by the prevailing wage rate.
D) The typical labor supply curve is upward sloping.

Question 31

A decrease in the marginal product of labor would be represented by a(n):

A) increase in labor demand.
B) decrease in labor demand.
C) increase in the quantity demanded of labor.
D) decrease in the quantity demanded of labor.

Question 32

Exhibit 10-5 A perfectly competitive labor market $$\begin{array} { | l | | l | l | } \hline \begin{array} { c } \text { Quantity of Labor } \\\text { (thousands) }\end{array} & \text { Marginal Revenue Product } & \text { Wage Rate } \\\hline \hline 5 & \$ 25.00 & \$ 5.00 \\\hline \hline 10 & 20.00 & 10.00 \\\hline \hline 15 & 15.00 & 15.00 \\\hline \hline 20 & 10.00 & 20.00 \\\hline \hline 25 & 5.00 & 25.00 \\\hline\end{array}$$ In Exhibit 10-5, when the marginal revenue product is $20.00, firms should

A) continue hiring workers.
B) stop hiring workers.
C) start firing workers.
D) pay a wage above $15.00 to its workers

Question 33

Exhibit 10-4 Supply and demand curves for food servers

In Exhibit 11-4, suppose that in the interest of boosting incomes of the working poor, Congress imposes a minimum wage of $6.00 per hour. This minimum wage rate creates a(n):

A) new labor market equilibrium.
B) excess demand for labor of 10 thousand food servers.
C) excess supply of labor of food servers.
D) situation of full employment for food servers.

Question 34

Explain how the presence of a superstar basketball player can increase the marginal revenue product of the other players on the team.

Question 35

A union may attempt to obtain stricter certification requirements or longer apprenticeships. These changes would raise workers' wages because they:

A) create unnecessary unemployment.
B) shift in labor supply curve leftward.
C) decrease the marginal product of labor.
D) reduce management's use of featherbedding.

Question 36

Suppose a change in technology increases the marginal product of labor. The result is a(n):

A) downward movement along the demand for labor curve.
B) rightward shift in the demand for labor curve.
C) leftward shift in the demand for labor curve.
D) upward movement along the demand for labor curve.

Question 37

If the wage rate is fixed at a certain level, the:

A) labor supply curve is horizontal.
B) labor supply is a straight upward sloping line.
C) MP must be constant.
D) labor supply will increase at an increasing rate.

Question 38

Describe the decision for a perfectly competitive employer in determining the profit maximizing quantity of labor to employ.

Question 39

A technological advance that increases the productivity of teachers can be expected to have what effects on the equilibrium labor market for teachers?

A) Wages will rise, and quantity of labor will fall.
B) Wages will rise, and quantity of labor will rise.
C) Wages will fall, and quantity of labor will fall.
D) Wages will fall, and quantity of labor will rise.

Question 40

Harold Brown runs a company that sells encyclopedia sets for $250 each. When he employs 10 workers, they can sell 60 sets per week, while only 54 sets are sold when 9 workers are employed. What is the weekly marginal revenue product of the tenth worker?

A) $250.
B) $1,250.
C) $1,500.
D) $15,000.

Question 41

What happens to the marginal product of labor when the market price of the good produced increases?

A) Increases proportional to price.
B) Decreases proportional to price.
C) Stays the same.
D) Falls because quantity demanded falls.

Question 42

Which of the following would cause the demand for labor to change?

A) a change in the price of the good produced
B) a change in the cost of living
C) changes in the wage rate
D) movements along the labor demand curve

Question 43

Describe the two basic strategies of unions in increasing wage rates for their members.

Question 44

If union-sponsored advertisements for a particular product succeed in increasing the demand for that product , the:

A) demand for the union-labor used to produce the product will increase.
B) demand for the union-labor used to produce the product will decrease.
C) marginal cost of union-labor will increase.
D) marginal cost of union-labor will decrease.

Question 45

Which part of the United States has the largest union membership measured as the percentage of civilian employees in unions?

A) south-western states
B) western states that do not border the Pacific Ocean
C) south-eastern states
D) mid-western states

Question 46

A union can influence the demand for labor by:

A) requiring union fees.
B) raising union fees.
C) effective advertising that convinces customers to buy the "union label."
D) lobbying for legislation to reduce immigration.

Question 47

If the MRP of labor decreases, labor:

A) demand will decrease.
B) demand will increase.
C) supply will increase.
D) supply will decrease.

Question 48

A technological advance that increases labor productivity will:

A) decrease the demand for labor as MP falls.
B) decrease the demand for labor as fewer workers are needed.
C) decrease the supply of labor as fewer workers are needed.
D) increase the demand for labor as MP rises.

Question 49

Which of the following can shift the labor demand curve to the right?

A) decrease in product price
B) increase in wages
C) increase in productivity
D) decrease in the marginal product

Question 50

A union may negotiate limits on workload in order to increase the demand for labor and raise workers' salaries. This practice is known as:

A) featherbedding.
B) human capital formation.
C) monopsonistic bargaining.
D) artificial demand stimulus.

Question 51

If cats become a more popular pet in the United States than they are now, what can we expect to happen to the market for cat food workers?

A) MP increases
B) MRP increases
C) wage decreases
D) MRP decreases

Question 52

If the price of labor falls, we can expect:

A) demand for labor will increase.
B) quantity demanded of labor will increase.
C) demand for labor will decrease.
D) quantity demanded of labor will decrease.

Question 53

Exhibit 10- 7  Demand for labor curves

In Exhibit 10-7, which of the following could have caused the shift in labor demand from D ₁ to D ₂ ?

A) Increase in the demand for the product.
B) Decrease in wages.
C) Decrease in price of product.
D) Decrease in demand for the product.

Question 54

Featherbedding allows unions to increase wages by:

A) limiting the supply of labor.
B) increasing firms' demand for labor.
C) forcing firms to accept higher-than-equilibrium wages.
D) reducing labor share of payroll taxes.

Question 55

The process of negotiating labor contracts between the union and management concerning wages and working conditions is called

A) collective bargaining.
B) featherbedding.
C) lobbying.
D) an apprenticeship.

Question 56

If product price increases, then:

A) MP will increase.
B) MFC will increase.
C) MRP will increase.
D) MP will decrease.

Question 57

Suppose the price of HD televisions decreases. As a result, the

A) MP of the workers making HD televisions will increase.
B) MFC of the workers making HD televisions will increase.
C) MRP of the workers making HD televisions will increase.
D) MRP of the workers making HD televisions will decrease.

Question 58

An advance in technology which increases labor productivity will shift the:

A) labor demand curve to the left.
B) MRP curve to the left.
C) MP curve downward.
D) labor demand curve to the right.

Question 59

Which of the following will decrease the demand for fast-food burger workers' labor?

A) More people start working two jobs and eat more fast food.
B) The price of pizza, a substitute for burgers, decreases.
C) A new technology allows burgers to be produced faster.
D) Workers get additional training that increases productivity.

Question 60

Currently, union membership in the United States is about what percentage of civilian employees?

A) 10 percent.
B) 15 percent.
C) 20 percent.
D) 25 percent.

Question 61

The poverty line equals the:

A) average income of the bottom one-tenth of all income recipients.
B) cost of an economical and nutritional food plan for a family multiplied by six.
C) cost of an economical and nutritional food plan for a family multiplied by three.
D) average income of a family headed by a worker who has been unemployed for six months or more.

Question 62

If a monopsonist offers a wage of $6, he finds that 1,200 people are willing to work for him. This means that the:

A) marginal factor cost is $6.
B) marginal factor cost is $200.
C) total wage cost is $1,200.
D) total wage cost is $7,200.

Question 63

Describe the factors that could cause an increase in the wage rate of workers.

Question 64

"Dividing the economic pie more equally may reduce the size of the economic pie." This argument is characterized as:

A) a trade off between interest rates and unemployment.
B) a form of discrimination.
C) a conflict between equity and efficiency.
D) a conflict between full employment and economic growth.

Question 65

According to the economic theory of labor markets, if unions are successful in raising wages, with no accompanying increase in labor productivity, then which of the following is true ?

A) The quantity of labor demanded by profit-maximizing firms will decline.
B) The quantity of labor demanded by profit-maximizing firms will increase.
C) The quantity of labor supplied by workers will decline.
D) There will be a shortage of labor in the unionized labor market.

Question 66

An increase in demand for French fries will cause equilibrium wage rates:

A) and quantities of potato workers hired to rise.
B) and quantities of potato workers hired to fall.
C) to rise and quantities of potato workers hired to fall.
D) to fall and quantities of potato workers hired to rise.

Question 67

The demand curve for labor of Coca-Cola manufacturers will not shift to the right if:

A) Coca-Cola workers become unionized.
B) the price of Coca-Cola increases.
C) the firms innovate with new technology that raises labor productivity.
D) the price of Pepsi increases.

Question 68

Exhibit 10-12 Income distribution for three countries $$\begin{array} { | l | c | c | c | } \hline \text { Quintile } & \text { Country I (\%) } & \text { Country II (\%) } & \text { Country III (\%) } \\\hline \text { Poorest } & 6 & 8 & 4 \\\text { Second } & 12 & 12 & 8 \\\text { Third } & 15 & 15 & 10 \\\text { Fourth } & 27 & 30 & 30 \\\text { Richest } & 40 & 35 & 48 \\\hline\end{array}$$ Exhibit 10-12 shows the percentage of income received by each population quintile. From this chart we can conclude:

A) Country I has the most unequal income distribution.
B) Country III has a more equal income distribution than Country II.
C) Country II has the most unequal income distribution.
D) Country II has the most equal income distribution.

Question 69

Which of the following are not counted when we compare a family's income to the poverty line?

A) food stamps
B) social security payments
C) unemployment compensation payments
D) Temporary Assistance for Needy Families (TANF)

Question 70

If a union is able to successfully lobby Congress to limit imports of rival products, and thus to raise the demand (and thus price) for the goods or services they make, then which of the following best describes the outcome?

A) The supply of labor will increase.
B) The demand for labor will increase.
C) The supply of labor will decrease.
D) The demand for labor will decrease.

Question 71

Exhibit 10-12 Income distribution for three countries $$\begin{array} { | l | c | c | c | } \hline \text { Quintile } & \text { Country I (\%) } & \text { Country II (\%) } & \text { Country III (\%) } \\\hline \text { Poorest } & 6 & 8 & 4 \\\text { Second } & 12 & 12 & 8 \\\text { Third } & 15 & 15 & 10 \\\text { Fourth } & 27 & 30 & 30 \\\text { Richest } & 40 & 35 & 48 \\\hline\end{array}$$ Exhibit 10-12 shows the percentage of income received by each population quintile. In Country I we can conclude that the:

A) richest 20 percent of the population received 25 percent of the economy's income.
B) richest 20 percent of the population received 40 percent of the economy's income.
C) richest 20 percent of the population received 80 percent of the economy's income.
D) least-wealthy 20 percent of the population received 40 percent of the economy's income.

Question 72

If the poverty line in 2017 for a family of four was $24,600, which of the following is correct?

A) The cost of a minimal diet for a family of four was $4,100.
B) The cost of a minimal diet for a family of four was $6.150.
C) Unemployment benefits covered the first $24,600 of lost income.
D) Social security payments for the year totaled a minimum of $24,600 for a family of four.

Question 73

Exhibit 10-11 Labor wage and cost data $$\begin{array} { | c | c | c | c | } \hline \text { Labor } & \text { Wage } & \text { TWC } & \text { MFC } \\\hline 10 & \$ & \$ 50.00 & \$ \\\hline 11 & 5.80 & & \\\hline 12 & & & 17.80 \\\hline 13 & & 102.70 & \\\hline 14 & & 126.00 & \\\hline 15 & & & 46.50 \\\hline\end{array}$$ In Exhibit 10-11, the total wage cost of hiring 12 employees is equal to:

A) $17.80.
B) $63.80.
C) $102.70.
D) $81.60.

Question 74

Make a case for income inequality.

Question 75

Explain why wage rates might rise at Joe's Quik-Print Shop if Joe replaces his aging copy machines with state-of-the-art copy machines.

Question 76

If more and better technology is used for producing wheat in the United States than in a lesser-developed country, then the:

A) MRP of the U.S. workers will be higher than the MRP of the workers in the lesser-developed country.
B) MRP of the U.S. workers will be lower than the MRP of the workers in the lesser-developed country.
C) demand for the U.S. workers will be lower than the demand for the workers in the lesser developed country.
D) price of wheat will be higher in the United States than in the lesser-developed country.

Question 77

Exhibit 10-12 Income distribution for three countries $$\begin{array} { | l | c | c | c | } \hline \text { Quintile } & \text { Country I (\%) } & \text { Country II (\%) } & \text { Country III (\%) } \\\hline \text { Poorest } & 6 & 8 & 4 \\\text { Second } & 12 & 12 & 8 \\\text { Third } & 15 & 15 & 10 \\\text { Fourth } & 27 & 30 & 30 \\\text { Richest } & 40 & 35 & 48 \\\hline\end{array}$$ Exhibit 10-12 shows the percentage of income received by each population quintile. In Country II we can conclude that the:

A) least-wealthy 40 percent of the population received 20 percent of the economy's income.
B) least-wealthy 20 percent of the population received 25 percent of the economy's income.
C) richest 20 percent of the population received 20 percent of the economy's income.
D) richest 40 percent of the population received 35 percent of the economy's income.

Question 78

If official U.S. poverty statistics included in-kind transfer payments the:

A) poverty rate would be close to zero.
B) poverty rate would be lower.
C) government deficit would be lower.
D) top 10 percent of those in the income distribution would be wealthier.

Question 79

Which of the following statements is true ?

A) Derived demand for labor depends on the demand for the other inputs into production.
B) Unions can either increase demand or decrease the supply of labor.
C) Investment in human capital is expected to decrease the demand for those workers because there will be a greater number of qualified workers available.
D) Unions can effectively increase wages by lobbying for looser immigration laws.

Question 80

Of the following demographic groups, which has the lowest poverty rate in the U.S.?

A) Families headed by a female with no husband.
B) Families in which the "head of the household" has not attained a high-school education.
C) Families headed by a male with no wife
D) Families in which the "head of the household" has attained at least a bachelor's degree from a college or university.