Deck 11: Labour Markets and the Distribution of Income

Question 1

When labour is a firm's only variable input in its production process, what point will a profit-maximizing firm continue to employ additional workers until?

A) as long as the marginal revenue product of labour > the marginal resource cost
B) as long as the marginal product of labour = 0
C) as long as the marginal product of labour > 0
D) as long as the marginal revenue product of labour < the marginal resource cost

Answer 1

as long as the marginal revenue product of labour > the marginal resource cost

Question 2

Approximately what percentage of national income goes to wages and salaries for labour services?

A) 45 percent
B) 60 percent
C) 70 percent
D) 90 percent

Answer 2

70 percent

Question 3

Which of the following best describes the concept of derived demand?

A) The price of land used to grow corn helps determine the price of corn.
B) The price of corn helps determines the price of land used to grow corn.
C) Cheap labour means cheap corn.
D) The price of land used to grow corn is inversely related to the price of corn.

Answer 3

The price of corn helps determines the price of land used to grow corn.

Question 4

The demand for labour is a derived demand. Until what point do employers hire workers?

A) when the wage rate equals the marginal revenue product of labour
B) when last worker hired adds nothing to total output
C) when the wage rate equals the average product of labour
D) when the average product of labour is zero

Question 5

Which of the following best illustrates the concept of derived demand?

A) An increase in the price of gasoline leads to an increase in the demand for small cars.
B) An increase in the wages of autoworkers leads to an increase in the demand for robots in automobile factories.
C) An auto firm decides to supply more minivans when there is a decrease in the demand for station wagons.
D) An automobile firm faces an increase in the demand for cars it supplies to the market, which leads to an increase in the demand for autoworkers.

Question 6

What relationship does the market supply curve for labour show?

A) The relationship between the wage rate and the quantity of labour that workers are willing to supply.
B) The relationship between the price of output and the number of employees firms are willing to hire.
C) The relationship between the wage rate and the number of employees firms are willing to hire.
D) The relationship between the price of output and the quantity of labour that workers are willing to supply.

Question 7

When should the profit-maximizing firm continue hiring additional labour?

A) as long as MRC = MRP
B) as long as MRC > MRP
C) as long as the MP of labour > 0
D) as long as MRC < MRP

Question 8

What can we conclude the greater the marginal revenue product of labour is?

A) the greater the demand for labour is
B) the greater the supply of labour is
C) the lower the equilibrium wage is
D) the lower the marginal resource cost of production is

Question 9

If the demand for hockey tickets increases, why might one expect the salaries of hockey players to increase?

A) because of the reduction in the supply of world class hockey players
B) because of the demand for an input being a derived demand
C) because of the change in the opportunity cost of building new arenas
D) because of the principle of diminishing marginal product

Question 10

What does the marginal product of labour measure?

A) the amount of output an individual worker contributes to a firm's total output
B) the total amount of output produced by all workers combined
C) the quantity of an intermediate product that is combined with labour to produce output
D) the average productivity of workers hired by a firm

Question 11

When a firm is competitive in both product and factor markets, which of the following statements best describes the value of the marginal product of labour?

A) It increases, causing the labour supply curve to slope upward.
B) It declines because the marginal product of labour diminishes as the number of workers rises.
C) It declines because a competitive firm must lower product price in order to increase sales.
D) It is constant and equal to the market wage.

Question 12

Which of the following would NOT shift the market supply of labour resources?

A) the amount of immigration allowed
B) the market wage rate
C) the number of hours workers are willing to work
D) changes in a nation's working-age population

Question 13

If an additional sales clerk is hired to work in a furniture store, the clerk's sales efforts will contribute $700 to the store's total revenue. Under what circumstances will the store's profits rise if the additional sales clerk is hired?

A) if the cost of hiring the clerk is less than $700 in wages and other costs
B) if the cost of hiring the clerk is equal to$700 in wages and other costs
C) if the cost of hiring the clerk is more than $700 in wages and other costs
D) if the cost of hiring the clerk is equal to $701 in wages and other costs

Question 14

Mr. Calhoun owned land on which cranberries could be grown, but which he had been unable to rent for years. Suddenly he was getting offers from cranberry farmers to lease his land. Which of the following best explains this change in circumstances?

A) The price of cranberries decreased.
B) Property taxes on the land increased.
C) The price of cranberries increased.
D) The productivity of the land increased.

Question 15

What is the major reason the market demand curve for labour slopes downward?

A) because at lower wage rates, workers are more willing to supply labour to the market
B) because at lower wage rates, workers are less willing to supply labour to the market
C) because of the law of diminishing marginal product
D) because of the law of diminishing marginal resource cost

Question 16

What is the term for the relationship between the wage rate and the quantity of labour that employers wish to hire?

A) an individual supply curve for labour
B) the market demand curve for labour
C) the market supply curve for labour
D) an individual demand curve for labour

Question 17

Why is demand for inputs a derived demand?

A) The demand for output leads producers to demand inputs used to produce finished goods.
B) It is derived from the need for income.
C) It is due to the diminishing marginal product of inputs.
D) It corresponds to the derived supply of the inputs.

Question 18

Approximately what percentage of national income is compensation received by owners of land, capital, and entrepreneurial skills?

A) 10 percent
B) 30 percent
C) 40 percent
D) 55 percent

Question 19

When a profit-maximizing firm makes a decision to employ a worker, what is that decision based on?

A) the familial relationship between the employer and the employee
B) the average productivity of the firm's labour force
C) the individual contribution that the worker makes to the profit of the firm
D) the total output produced by the firm

Question 20

When a firm evaluates the contribution of a worker to its profits, it must first calculate the worker's contribution to revenue. What must the firm subtract from revenue to calculate profit?

A) the worker's average revenue
B) the worker's marginal productivity
C) the worker's wage
D) the worker's output

Question 21

Several Members of Parliament have been greatly concerned about the fairness of salaries in the marketplace. They are contemplating enacting a law that would fix the wage rate at WA. Their aides have returned with the results of an investigation into the matter, as portrayed in Graphs A and B.
FIGURE 11-1

Refer to Figure 11-1. If the law were not enacted, what would the prevailing wage rate and quantity of labour at equilibrium in the market for computer software programmers be?

A) WC and Q5, respectively
B) WA and Q6, respectively
C) WA and Q4, respectively
D) WA and Q5, respectively

Question 22

What will improvements in the productivity of labour tend to do?

A) decrease wages
B) decrease the supply of labour
C) increase wages
D) increase the supply of labour

Question 23

Which of the following would cause the demand for carpenters to increase?

A) an increase in the demand for housing
B) a decrease in immigration
C) a decrease in the productivity of carpenters
D) an increase in the price of lumber

Question 24

If workers have more capital to work with, labour productivity increases. What would the result in the market demand curve for labour be?

A) It would decrease.
B) It would first decrease significantly and then increase.
C) It would remain constant.
D) It would increase.

Question 25

Several Members of Parliament have been greatly concerned about the fairness of salaries in the marketplace. They are contemplating enacting a law that would fix the wage rate at WA. Their aides have returned with the results of an investigation into the matter, as portrayed in Graphs A and B.
FIGURE 11-1

Refer to Figure 11-1. If a wage rate of WA for teachers were imposed by the federal government on schools, what would the expected result be?

A) a teacher shortage of Q3 - Q1
B) a teacher surplus of Q3 - Q1
C) a teacher shortage of Q3 - Q2
D) a teacher surplus of Q2 - Q1

Question 26

Several Members of Parliament have been greatly concerned about the fairness of salaries in the marketplace. They are contemplating enacting a law that would fix the wage rate at WA. Their aides have returned with the results of an investigation into the matter, as portrayed in Graphs A and B.
FIGURE 11-1

Refer to Figure 11-1. If the wage law were NOT enacted, what would the prevailing wage rate and quantity of labour in the marketplace for K-12 teachers at equilibrium be?

A) WB and Q1, respectively
B) WA and Q2, respectively
C) WA and Q3, respectively
D) WB and Q2, respectively

Question 27

If above a certain wage rate a worker prefers to work less and enjoy more leisure (the income effect dominates the substitution effect), how is the labour supply curve drawn?

A) as a vertical supply curve
B) as a backward-bending supply curve
C) as a downward-sloping supply curve
D) as an upward-sloping supply curve

Question 28

Which of the following is NOT expected to increase the marginal product of labour?

A) a technological improvement
B) an increase in capital available to work with
C) the acquisition of on-the-job experience by employees
D) an increase in the wage rate

Question 29

What does the income effect indicate about the relationship between the wage rate and leisure on the quantity of labour supplied?

A) At a higher wage rate, the quantity of labour supplied increases because leisure is considered an inferior good.
B) At a higher wage rate, the quantity of labour supplied decreases because leisure is considered an inferior good.
C) At a higher wage rate, the quantity of labour supplied decreases because leisure is considered a normal good
D) At a higher wage rate, the quantity of labour supplied increases because leisure is considered a normal good.

Question 30

In regards to the quantity of labour supplied, what does the substitution effect indicate about the relationship between the wage rate and the opportunity cost of leisure?

A) At a higher wage rate, the opportunity cost of leisure decreases making leisure less expensive.
B) At a higher wage rate, the opportunity cost of leisure increases making leisure less expensive.
C) At a higher wage rate, the opportunity cost of leisure increases making leisure more expensive.
D) At a higher wage rate, the opportunity cost of leisure decreases making leisure more expensive.

Question 31

Several Members of Parliament have been greatly concerned about the fairness of salaries in the marketplace. They are contemplating enacting a law that would fix the wage rate at WA. Their aides have returned with the results of an investigation into the matter, as portrayed in Graphs A and B.
FIGURE 11-1

Refer to Figure 11-1. If the government were to impose a wage rate of WA on the computer software programming industry, what would the result in the industry be?

A) The imposed wage would have no effect on the market for computer programmers.
B) A quantity of Q4 software programmers would be demanded in the marketplace.
C) A shortage of software programmers would result.
D) There would be pressure from market forces for the wage to fall.

Question 32

Several Members of Parliament have been greatly concerned about the fairness of salaries in the marketplace. They are contemplating enacting a law that would fix the wage rate at WA. Their aides have returned with the results of an investigation into the matter, as portrayed in Graphs A and B.
FIGURE 11-1

Refer to Figure 11-1. If the wage law were enacted, what would the result in the market for computer programmers be?

A) a shortage of Q6 - Q5
B) a surplus of Q6 - Q4
C) a surplus of Q6 - Q5
D) a shortage of Q6 - Q4

Question 33

If labour demand is downward sloping and labour supply is upward sloping, then when labour demand increases faster than labour supply, what is the effect on real wages?

A) They will stay the same
B) They will increase
C) They will decrease
D) They may increase, decrease, or stay the same depending on the relative slopes.

Question 34

Which of the following results in a rightward shift of the market demand curve for labour?

A) a decrease in the firm's product price
B) an increase in the wage rate
C) a decrease in labour productivity
D) an increase in demand for the firm's product

Question 35

If there is an increase in productivity or an increase in the demand for the final product, what is the impact in the labour market?

A) The labour demand curve will shift left.
B) The labour supply curve will shift left.
C) The labour supply curve will shift right.
D) The labour demand curve will shift right.

Question 36

Which of the following will NOT result in a leftward shift of the market demand curve for labour?

A) a decrease in labour productivity
B) an increase in the wage rate
C) a decrease in the firm's product price
D) a decrease in demand for the firm's product

Question 37

Which of the following will NOT result in a rightward shift of the market supply curve for labour?

A) an increase in labour productivity
B) a decrease in nonwage income
C) an increase in the working-age population
D) an increase in immigration

Question 38

What do improvements in the productivity of labour tend to result in?

A) an increase the demand for labour
B) an increase the supply of labour
C) a decrease the demand for labour
D) a decrease the supply of labour

Question 39

Several Members of Parliament have been greatly concerned about the fairness of salaries in the marketplace. They are contemplating enacting a law that would fix the wage rate at WA. Their aides have returned with the results of an investigation into the matter, as portrayed in Graphs A and B.
FIGURE 11-1

Refer to Figure 11-1. If the law were to impose a wage rate of WA on the K-12 teachers market, what would the expected result be?

A) The demand for K-12 teachers would decrease.
B) A shortage of K-12 teachers would soon result.
C) A quantity of Q2 teachers would be supplied to the marketplace.
D) There would be pressure from market forces for the supply to fall.

Question 40

Compared to a worker in a comparable job, which of the following best describes an employee receiving on-the-job training?

A) They will earn a lower wage.
B) They will be more productive.
C) They will earn a higher wage.
D) They will earn an equal wage.

Question 41

What type of market is characterized by a single buyer?

A) a monopoly
B) an oligopoly
C) a duopoly
D) a monopsony

Question 42

If a specific labour market is considered to be a monopsony, who has the power and can impact wages?

A) The buyer and seller of labour have equal power in the market as they can both affect wages.
B) Neither the buyer nor the seller of labour has market power because the wage rate is determined by the market forces of demand and supply.
C) The buyer of labour generally has market power and they can affect wages.
D) The seller of labour generally has market power and they can affect wages.

Question 43

Which of the following statements best describes job amenities?

A) They have no impact on the supply of labour.
B) They help determine the position of the labour supply curve.
C) They are not part of the compensation workers receive from employers.
D) They never affect the monetary wages paid to workers.

Question 44

Which of the following people are most likely to face a monopsony employer?

A) an athlete drafted by a team in the NHL
B) a computer software engineer
C) an economics professor
D) a tax lawyer

Question 45

What will an increase in the demand for a product cause output to do?

A) Decline, while the demand for the resources used to produce the product will remain constant.
B) Increase, and the demand for the resources used to produce the product will rise.
C) Increase, and the price of resources used to produce the product will increase if their supply is perfectly elastic.
D) Increase, and the demand for the resources used to produce the product will fall.

Question 46

Which of the following will result in a leftward shift of the market supply curve for labour?

A) an increase in nonwage income
B) a decrease in labour productivity
C) an increase in the working-age population
D) an increase in immigration

Question 47

Which of the following is likely to increase the supply of labour?

A) a decrease in fringe benefits
B) a relaxation of restrictions on immigration
C) an increase in the value placed on leisure
D) a decrease in the population

Question 48

Which of the following will contribute to lower wage rates for labour?

A) increases in productivity
B) a decrease in the supply of labour
C) decreases in capital formation
D) increases in marginal productivity of labour

Question 49

Under which of the following conditions will the labour supply curve shift to the left?

A) when, on average, people wait longer before retiring
B) when nonlabour income increases
C) other things being equal, when workers are willing to supply more hours of labour each week
D) when new workers enter the labour market

Question 50

What would an increase in the price of a resource cause?

A) an increase in the price of substitute resources in production
B) producers to use more of the resource in the production of their goods
C) consumers to substitute other products for goods that increase in price as the result of the higher resource price
D) an increase in the demand for products that use the resource intensely

Question 51

Other things being equal, what effect would an increase in the workplace amenities, such as increased health care and more generous vacation options, tend to have on the labour supply curve?

A) It would shift the curve right, decreasing wages.
B) It would shift the curve right, increasing wages.
C) It would shift the curve left, increasing wages.
D) It would shift the curve left, decreasing wages.

Question 52

How is a monopsony defined?

A) as a market with only one buyer
B) as a union that represents only one type of worker
C) as a market with only one seller
D) as a market with only one buyer and only one seller

Question 53

Which of the following is NOT an example of job amenities?

A) higher wages
B) a child-care centre at work
C) a workplace gymnasium
D) health insurance benefits

Question 54

Which of the following does NOT contribute to increased worker productivity?

A) increased labour supply
B) improvements in workers' skills
C) technological advances
D) increased capital formation

Question 55

Other things being equal, what would an increase in the labour force resulting from increased immigration tend to result in?

A) decreased wages
B) a decrease in the demand for labour
C) an increase in the demand for labour
D) increased wages

Question 56

As of 2010, what percentage of Canadian workers belongs to a union?

A) about 16 percent
B) about 30 percent
C) about 47 percent
D) more than 80 percent

Question 57

Which of the following might shift an individual's supply curve of labour to the left?

A) a decrease in nonwage income
B) winning the lottery
C) a decrease in the willingness of businesses to hire additional workers
D) an increase in the wage

Question 58

Which of the following will NOT contribute to higher wage rates for labour?

A) increased unionization and decreased nonunionization of employees in the economy
B) increases in technological advances
C) significantly relaxed immigration standards
D) a rapid increase in the demand for labour

Question 59

Which of the following is NOT a reason why it is harder to unionize in the fast-growing service industry?

A) Employees in the service sector often work more closely with management.
B) Service industry jobs are often standardized, reducing the need for unions to negotiate working conditions.
C) Service sector jobs are often in small firms, making it difficult to organize large numbers of employees across the industry.
D) Service industry jobs are more varied, making it harder to negotiate as a group.

Question 60

How does employment under a monopsony differ from employment under perfect competition?

A) More workers are hired at lower wages in a monopsony.
B) Fewer workers are hired at higher wages in a monopsony.
C) Fewer workers are hired at lower wages in a monopsony.
D) More workers are hired at higher wages in a monopsony.

Question 61

In which of the following areas have unions NOT found it particularly difficult to organize workers in?

A) service industries
B) white-collar occupations
C) public sectors, such as education
D) agriculture

Question 62

Which of the following industries has the lowest rate of unionization in Canada?

A) public administration
B) agriculture
C) health care and social services
D) education

Question 63

Which of the following countries shows the greatest degree of income inequality?

A) Sweden
B) Canada
C) Brazil
D) United States of America

Question 64

Which of the following best describes the makeup of labour force participation in Canada?

A) The very old participate to a greater extent than do the very young and middle-aged.
B) The very young and very old participate to a greater extent than do the middle-aged.
C) The very young participate to a greater extent than do the middle-aged and very old.
D) The middle-aged participate to a greater extent than do the very young and very old.

Question 65

What is the process of negotiations between representatives of employees and unions referred to as?

A) industry bargaining
B) collective bargaining
C) standard-of-living negotiations
D) worker negotiations

Question 66

Approximately how much higher are wages in union jobs than in comparable nonunion jobs?

A) 0-10 percent
B) 10-25 percent
C) 25-35 percent
D) 35-50 percent

Question 67

When are people at their peak in terms of productivity?

A) when they start their first job
B) when they are young
C) when they are about to retire
D) when they are middle-aged

Question 68

Which of the following best describes the impact of unionization on given occupations?

A) It results in ease of entry and tends to lead to an increase in wage rates.
B) It results in ease of entry and tends to lead to a decrease in wage rates.
C) It results in barriers to entry and tends to lead to a decrease in wage rates.
D) It results in barriers to entry and tends to lead to an increase in wage rates.

Question 69

According to Medoff and Freeman, how might unions make workers more productive?

A) by providing a forum for the communication of worker grievances
B) by increasing the potential for promotion
C) by raising wages
D) by increasing the number of jobs

Question 70

Which of the following countries shows the lowest disparities in income?

A) United States of America
B) Brazil
C) Canada
D) Sweden

Question 71

FIGURE 11-2

Refer to Figure 11-2. When unions successfully increase the wages of their members, what happens to the supply curve and workers in the union sector?

A) The curve shifts from S1 to S2 and workers from L2 to L1 lose their jobs.
B) The curve shifts from S2 to S1 and workers from L2 to L1 lose their jobs.
C) The curve shifts from S1 to S2 and workers from L3 to L1 lose their jobs.
D) The curve shifts from S2 to S1 and workers from L3 to L1 lose their jobs.

Question 72

Which of the following best describes labour unions and the wage rate?

A) They have no influence over wages since unions focus only on working conditions.
B) They can influence wages by restricting labour supply.
C) They have no influence on wages since it is illegal to collude in Canada.
D) They can influence wages by decreasing the labour demanded.

Question 73

If the demand for software engineers increases slower than does supply, what will the effect on the wages of software engineers be?

A) They will fall.
B) They will remain constant.
C) They will rise.
D) They will first rise and then eventually will fall.

Question 74

Which province has the highest union rate in Canada?

A) Newfoundland and Labrador
B) Alberta
C) British Colombia
D) Quebec

Question 75

Evidence suggests that share of income has decreased for the middle class from 1951 to 2000. What has occurred to the share of income for higher-income Canadians and lower-income Canadians during this time period?

A) It has remained relatively stable for higher-income Canadians and decreased for lower-income Canadians.
B) It has increased for higher-income Canadians and remained relatively stable for lower-income Canadians
C) It has increased for higher-income Canadians and decreased for lower-income Canadians.
D) It has decreased for higher-income Canadians and increased for lower-income Canadians.

Question 76

What is the most significant factor, enabling unions to negotiate increased wages for their members?

A) Unions increase the demand for labour.
B) Unions decrease the supply of labour in the union sector.
C) Unions increase the marginal product of labour.
D) Unions increase the supply of labour in the union sector.

Question 77

Which of the following will occur if labour unions successfully negotiate wage increases for its members?

A) The relative wages in nonunion sectors decrease.
B) Employment likely increases in the union sector.
C) Employment likely decreases in the nonunion sector.
D) The relative wages of nonunion workers increase as well.

Question 78

Firms with union contracts do a large portion of the painting jobs in the county. If the painters' union wins a 12 percent wage increase, what will most likely happen in the nonunionized part of the painters' labour market?

A) There will be no change in the nonunionized part of the painters' labour market because these sectors are not connected.
B) Many nonunion painters will likely find work for a firm with a union contract.
C) Nonunion painters will also get 12 percent wage increases.
D) Wage rates in the nonunion sector are likely to fall.

Question 79

Not all similarly skilled workers are included in unions. As a result, wages for unionized workers tend to be higher than for nonunion workers. As a significant number of skilled workers seek work in the nonunion sector, what is the impact on the supply curve and wages for nonunion labour?

A) The supply curve shifts left, increasing wages for non-union workers.
B) The supply curve shifts right, reducing wages for non-union workers.
C) The supply curve shifts right, increasing wages for non-union workers.
D) The supply curve shifts left, reducing wages for non-union workers.

Question 80

Why would there still be observed inequality, even if every individual earned the same total income over his or her lifetime?

A) because people earn more in middle age
B) because single people earn more in their youth
C) because married people earn more in their youth
D) because people earn more when they are very old