Deck 15: Labor Markets, Unions, and the Distribution of Income-A

Question 1

In a market system, wages are determined:

A) by government wage guidelines.
B) by the interaction of buyers and sellers of labor.
C) solely by the price at which a firm is willing to acquire labor.
D) solely by the price at which an individual is willing to sell their labor.

Answer 1

by the interaction of buyers and sellers of labor.

Question 2

Wages are determined by the interaction of supply and demand in:

A) resource markets.
B) product markets.
C) the government sector.
D) the foreign sector.

Answer 2

resource markets.

Question 3

-What will be the equilibrium wage in this labor market?

A) $8.
B) $12.
C) $16.
D) $20.

Answer 3

$12.

Question 4

-What is the situation in this labor market at a wage of $16 per hour?

A) The market is in equilibrium.
B) There is a surplus of 200 workers.
C) There is a surplus of 400 workers.
D) There is a shortage of 200 workers.

Question 5

-What would we expect to occur in this competitive labor market if the wage were $8 per hour?

A) Wages and employment would increase.
B) Wages and employment would decrease.
C) Wages would increase and employment would decrease.
D) Wages would decrease and employment would increase.

Question 6

In a competitive market for labor, the market demand curve for labor:

A) and the market supply curve of labor are both downward sloping.
B) is downward sloping, and the market supply curve of labor is upward sloping.
C) and the market supply curve of labor are both horizontal at the going market price.
D) is horizontal at the going market price, and the market supply curve of labor is upward sloping.

Question 7

A derived demand for factors of production means:

A) households derive income from factors of production they sell to businesses.
B) the value of a product is determined by the value of the factors of production used.
C) factors of production derive their value from government policies imposed on businesses.
D) the demand for factors of production depends on the demand for the product the factors produce.

Question 8

The demand for labor is called a derived demand because it depends on the:

A) price of labor.
B) income of the purchaser.
C) prices of inputs used with labor.
D) demand for the good or service the labor produces.

Question 9

Since the demand for a factor of production depends on the demand for the good or service the factor produces, the demand for the factor is said to be a:

A) derived demand.
B) secondary demand.
C) dependent demand.
D) productivity demand.

Question 10

The wage rate that an individual firm is willing to pay for a unit of labor is based on:

A) the cost of competing products.
B) the wage rates paid in other industries.
C) the dollar value of the labor's productivity to the firm.
D) the income earned by the top management of the firm.

Question 11

An individual firm's demand curve for labor is:

A) horizontal because there is no relationship between wage rates and the number of workers hired.
B) horizontal because firms can hire as many or as few workers as they wish at the going wage rate.
C) downward sloping because of the decreasing value of labor productivity as more workers are hired.
D) upward sloping because of the need to raise prices in order to pay the wages of additional workers that are hired.

Question 12

The value of labor falls as additional units of labor are hired because of:

A) declining profits and increasing costs.
B) decreasing marginal productivity and increasing costs.
C) declining profits and the need to lower product price to sell additional units.
D) decreasing marginal productivity and, in most cases, the need to lower product price to sell additional units.

Question 13

The declining value of labor productivity as more workers are hired is caused by:

A) decreasing marginal productivity as more workers are hired.
B) the need by most firms to lower product price in order to increase the quantity of goods and services demanded.
C) both of the above.
D) none of the above.

Question 14

The labor demand curve for an individual firm is:

A) upward sloping because businesses are willing to pay higher wages to hire more workers.
B) downward sloping because the value of labor's productivity falls as more workers are hired.
C) perfectly horizontal because labor's productivity does not change as more workers are hired.
D) downward sloping because workers will supply more hours of labor at lower wage rates than at higher wage rates.

Question 15

The value of labor is determined by the:

A) Law of Diminishing Returns and the Law of Supply.
B) Law of Diminishing Returns and the Law of Demand.
C) Law of Diminishing Marginal Utility and the Law of Supply.
D) Law of Diminishing Marginal Utility and the Law of Demand.

Question 16

The Law of Diminishing Returns states:

A) there is a direct relationship between price and quantity supplied.
B) there is an inverse relationship between price and quantity demanded.
C) as additional units of a good are consumed, beyond some point each additional unit will add less satisfaction.
D) as additional units of a variable factor are added to a fixed factor, beyond some point each additional unit of the variable factor will add less to output than did the previous unit.

Question 17

Marginal product is:

A) total product divided by total variable inputs.
B) the total output produced by all the variable inputs.
C) the change in total product that results when an additional unit of a variable input is used.
D) the change in total revenue when an additional unit of a variable input is added to the production process.

Question 18

As more labor is hired by a firm over the short run, the marginal product of each additional unit of labor will eventually decrease because of:

A) diseconomies of scale.
B) the Law of Diminishing Returns.
C) the decrease in the dollar value of labor's productivity since less is produced.
D) none of the above.

Question 19

Marginal product is the change in:

A) total revenue when one more unit of output is produced.
B) total output when one more unit of a variable resource is utilized.
C) total revenue when one more unit of a variable resource is utilized.
D) the total amount of a variable resource employed when one more unit of the resource is utilized.

Question 20

As more workers are hired by a firm and diminishing returns set in:

A) the total cost of labor falls.
B) the total product of labor falls.
C) total revenue for the firm falls.
D) the value of labor's productivity falls.

Question 21

As more workers are hired by a firm and diminishing returns set in, the dollar value of each additional worker's productivity:

A) increases.
B) decreases.
C) remains unchanged.
D) decreases initially and then increases.

Question 22

In markets other than those that are purely competitive, the value of additional production by labor:

A) cannot be determined.
B) increases since more of the product can be sold at a lower price.
C) is unaffected by any change in the price at which the product is sold.
D) falls because of the decline in price necessary to sell the additional product.

Question 23

Marginal revenue product is:

A) the total revenue produced by variable inputs.
B) the change in total revenue from selling an additional unit of output.
C) the change in total product that results when an additional unit of a variable input is added to the production process.
D) the change in total revenue that results from the sale of output when an additional unit of a variable input is used.

Question 24

The marginal revenue product of labor determines how many:

A) workers will be hired.
B) dollars of profit will be earned.
C) firms will operate in the market.
D) units of output will be sold at various prices.

Question 25

-What is the marginal product of the third worker?

A) 200 units.
B) 300 units.
C) 500 units.
D) 1,200 units.

Question 26

-What is the marginal revenue product of the third worker if the firm can sell whatever it produces at $5.00 each?

A) $300.
B) $1,200.
C) $1,500.
D) $6,000.

Question 27

Two workers produce 100 units of output that sell for $4.00 each. Three workers produce 150 units of output that sell for $3.20 each.

-The marginal product of the third workers is:

A) 50 units.
B) 100 units.
C) 150 units.
D) 250 units.

Question 28

Two workers produce 100 units of output that sell for $4.00 each. Three workers produce 150 units of output that sell for $3.20 each.

-The marginal revenue product of the third worker is:

A) -$0.80.
B) $40.00.
C) $80.00.
D) $480.00.

Question 29

-Diminishing returns:

A) set in when the first worker is hired.
B) set in when the second worker is hired.
C) do not set in because total product keeps increasing as more workers are hired.
D) cannot be determined from the information in the table.

Question 30

-The marginal product of the third worker hired is:

A) 160 units.
B) 380 units.
C) 540 units.
D) 920 units.

Question 31

-The marginal revenue product of the third worker hired is:

A) -$2.00.
B) $200.00.
C) $1,080.00.
D) $3,240.00.

Question 32

Four workers produce 200 ice cream bars that can be sold for $1 each. Five workers produce 225 ice cream bars that can be sold for $0.90 each. The marginal revenue product of the fifth worker is:

A) $0.90.
B) $2.50.
C) $22.50.
D) $25.00.

Question 33

The marginal revenue product of labor is:

A) the basis for the firm's demand curve for labor.
B) based on the marginal productivity of labor and the price of the product sold.
C) the change in total revenue caused by the sale of a product when one more unit of labor is used.
D) all of the above.

Question 34

Assume that the marginal revenue product of the fourth worker in a business is $9.00, of the fifth worker is $7.00, and of the sixth worker is $5.00. Given these figures, how many workers would the firm be willing to hire at a wage rate of $5.10?

A) Six.
B) Five.
C) Four.
D) Fewer than four.

Question 35

A firm will demand a worker as long as the worker's:

A) wage rate is not greater than the price of the product.
B) marginal revenue product equals the price of the product.
C) wage rate is not greater than the worker's marginal revenue product.
D) contribution to total revenue equals the worker's marginal revenue product.

Question 36

The demand curve for labor:

A) slopes downward.
B) is based on the marginal revenue product of labor.
C) shows the amount of labor that will be demanded at any given wage.
D) all of the above.

Question 37

The demand curve for labor is based on workers' marginal:

A) cost.
B) product.
C) revenue.
D) revenue product.

Question 38

Given the following table, a product price of $2.00, and an hourly wage of $10, how many workers will be employed by this firm?

A) 1 worker.
B) 2 workers.
C) 3 workers.
D) 4 workers.

Question 39

The supply curve for labor is:

A) vertical.
B) horizontal.
C) upward sloping.
D) downward sloping.

Question 40

Which of the following factors, in addition to income, might be considered by an individual deciding to enter a labor market?

A) Location.
B) Long-term gains.
C) Psychological rewards.
D) All of the above.

Question 41

Which of the following statements about labor supply is true?

A) The wage rate has no effect on labor supply decisions, and the typical labor supply curve is perfectly vertical.
B) The wage rate is the only factor affecting labor supply decisions, and the typical labor supply curve is upward sloping.
C) Labor supply decisions are affected by wage and nonwage factors, and the typical labor supply curve is upward sloping.
D) Labor supply decisions are affected by nonwage factors such as location and psychological rewards, and because of this the typical labor supply curve is horizontal at the going wage rate.

Question 42

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

A) The possibility of long-term gain has no effect on labor supply decisions.
B) The only important consideration in making labor supply decisions is the acceptability of the wage rate that is offered.
C) Individuals may be willing to work for lower wages in a particular location if earning higher wages requires relocation.
D) Psychic income, or the sense of fulfillment that comes from performing a job well, is found only in professional occupations such as law, teaching, and medicine.

Question 43

"Psychic" income refers to:

A) psychological rewards that come from working, like a feeling of accomplishment.
B) income generated by psychologically-related jobs like counseling.
C) income generated by gambling and other activities that rely on a psychic sense.
D) income from physical work like roofing and construction.

Question 44

A decrease in the equilibrium wage rate and equilibrium quantity of workers in a labor market would be caused by:

A) a decrease in labor supply.
B) an increase in labor supply.
C) a decrease in labor demand.
D) an increase in labor demand.

Question 45

A decrease in the equilibrium wage rate and an increase in the equilibrium quantity of workers in a labor market would be caused by:

A) a decrease in labor supply.
B) an increase in labor supply.
C) a decrease in labor demand.
D) an increase in labor demand.

Question 46

The basic supply and demand model predicts that a decrease in labor demand will shift the demand curve to the:

A) left and reduce wages.
B) left and increase wages.
C) right and reduce wages.
D) right and increase wages.

Question 47

In a competitive labor market, an increase in labor demand will:

A) reduce wages and employment.
B) increase wages and employment.
C) reduce wages and increase employment.
D) increase wages and reduce employment.

Question 48

An increase in labor supply will shift the supply curve to the:

A) left and reduce wages.
B) left and increase wages.
C) right and reduce wages.
D) right and increase wages.

Question 49

In a competitive labor market, a decrease in labor supply will:

A) reduce wages and employment.
B) increase wages and employment.
C) reduce wages and increase employment.
D) increase wages and reduce employment.

Question 50

If labor supply and labor demand both decrease, we should expect that:

A) wages will increase.
B) wages will decrease.
C) employment will increase.
D) employment will decrease.

Question 51

If labor supply decreases and labor demand increases, we should expect that:

A) wages will increase.
B) wages will decrease.
C) employment will increase.
D) employment will decrease.

Question 52

Which of the following would NOT cause the demand curve for labor to shift?

A) A change in wages.
B) A change in technology.
C) A change in the prices of substitute inputs.
D) A change in demand for the product produced.

Question 53

Product A and product B are substitute products produced by competing sellers. If the price of product A falls and its sales go up, you would expect:

A) an increase in the wage of workers producing product B.
B) a decrease in the demand for workers producing product B.
C) an increase in the demand for workers producing product B.
D) an increase in the wage of workers producing both product A and product B.

Question 54

Suppose a new computerized manufacturing technique is introduced that is cheaper than the current machine-based manufacturing technique. You would expect this new technique to:

A) increase the demand for computer operators and machine operators.
B) have no effect on the demand for computer operators or machine operators.
C) increase the demand for computer operators and decrease the demand for machine operators.
D) decrease the demand for machine operators and have no effect on the demand for computer operators.

Question 55

You would expect increased use of computerized direct-ordering of airline tickets by people who are traveling to:

A) reduce the demand for travel agents and raise their wages.
B) increase the demand for travel agents and raise their wages.
C) reduce the demand for travel agents and reduce their wages.
D) increase the demand for travel agents and reduce their wages.

Question 56

Application 15.1, "Go Green?"is about:

A) the casualties of auto plant closings in a community.
B) the demand for workers increasing as production deadlines approach.
C) the impact on the economy and firms from a social desire to recognize the importance of sustainability.
D) how a community in Ohio banded together to save jobs.

Question 57

Which of the following could cause a labor supply curve to shift?

A) Changes in immigration laws.
B) Changes in economic conditions.
C) Changes in labor market expectations.
D) All of the above.

Question 58

Which of the following would NOT cause a supply curve of labor to shift?

A) Demographic trends.
B) Changes in the wage rate.
C) Cyclical changes in economic conditions.
D) Changing expectations of future job prospects.

Question 59

Which of the following would cause a decrease in the supply of labor in a particular job market for full-time, unskilled workers?

A) A postponement of early retirements.
B) A cyclical downswing in the economy.
C) A growing number of good jobs in other labor markets.
D) A growth in the number of 17- through 22-year-olds in the population.

Question 60

Which of the following would cause a change in the quantity of labor demanded?

A) A change in wages.
B) Improvements in technology.
C) A change in the prices of substitute inputs.
D) A change in demand for the product produced.

Question 61

A change in the quantity supplied of labor would be caused by a change in:

A) wages.
B) immigration laws.
C) demographic trends.
D) economic conditions.

Question 62

-An increase in the wage rate paid to labor in this market would cause a:

A) shift from line 1 to line 2.
B) shift from line 4 to line 3.
C) movement from point a to point b.
D) movement from point d to point c.

Question 63

-An increase in the number of teenagers available to work in this labor market would cause a:

A) shift from line 2 to line 1.
B) shift from line 4 to line 3.
C) movement from point b to point a.
D) movement from point d to point c.

Question 64

-The introduction of a low-cost input that can be used in place of the labor in this market would cause a:

A) shift from line 2 to line 1.
B) shift from line 3 to line 4.
C) movement from point a to point b.
D) movement from point c to point d.

Question 65

-A decrease in the wage rate paid to labor in this market would cause a:

A) shift from line 1 to line 2.
B) shift from line 3 to line 4.
C) movement from point a to point b.
D) movement from point d to point c.

Question 66

-An increase in the demand for the product produced by labor in this market would cause a:

A) shift from line 1 to line 2.
B) shift from line 4 to line 3.
C) movement from point a to point b.
D) movement from point d to point c.

Question 67

Which of the following is NOT an imperfection that causes real world labor markets to deviate from the simple labor supply and demand model?

A) Wage rigidities.
B) Unequal bargaining power.
C) The Law of Diminishing Returns.
D) Legal considerations such as the minimum wage law.

Question 68

If wages are rigid and labor demand decreases, we should expect:

A) a reduction in employment and wages.
B) an increase in employment and wages.
C) a reduction in employment but no change in wages.
D) no change in employment and a reduction in wages.

Question 69

Wage rigidity can be attributed to:

A) labor contracts.
B) the minimum wage law.
C) unemployment compensation.
D) all of the above.

Question 70

Which of the following most accurately describes how real-world labor markets operate following a decrease in the demand for labor?

A) Money wages, but not employment, most likely drop.
B) Money wages and employment both most likely drop.
C) Employment, but not money wages, most likely drops.
D) Neither employment nor money wages are likely to drop.

Question 71

Money wages may not fall in a labor market when there is a decrease in the demand for labor because:

A) workers' are being paid the minimum wage.
B) workers consider it in their best interest to be laid off rather than take a pay cut.
C) employers are bound by labor agreements specifying the wages that must be paid.
D) all of the above.

Question 72

If the minimum wage is above the current equilibrium wage in a labor market, moving from the equilibrium wage to the minimum wage will:

A) increase wages and employment.
B) increase wages and reduce employment.
C) reduce wages and increase employment.
D) have no effect on either wages or employment.

Question 73

If the minimum wage is below the current equilibrium wage in a labor market, the minimum wage will:

A) have no effect on wages or employment.
B) lead to a decrease in wages and employment.
C) lead to a decrease in wages and an increase in employment.
D) lead to an increase in wages and a decrease in employment.

Question 74

Minimum wage laws will increase unemployment if they raise wages above workers' marginal:

A) cost.
B) product.
C) revenue.
D) revenue product.

Question 75

A minimum wage of $8.00 in a labor market where the equilibrium wage is $5.50 would result in:

A) a surplus of workers.
B) a shortage of workers.
C) no surplus or shortage of workers.
D) a reduction of the minimum wage to $5.50.

Question 76

The federal minimum wage:

A) was instituted in the 1930s and was initially 25 cents.
B) was established because employees had too much bargaining power.
C) has not changed over the past two decades.
D) lack all of the above.

Question 77

Suppose a town has only one employer and all of its workers belong to one labor union. You would expect these workers' wage rates to be:

A) equal to the competitive wage rate.
B) less than the competitive wage rate because there is only one employer.
C) greater than the competitive wage rate because one union represents all the workers.
D) less or greater than the competitive wage rate, depending on whether the employer or the union has greater bargaining power.

Question 78

Which of the following statements about labor unions in the United States is FALSE?

A) A labor union is an organization of workers that bargains in its members' behalf with management.
B) The percentage of wage and salary employees belonging to unions grew from the early 1980s to 2008.
C) Wages, working conditions, fringe benefits, and seniority are important concerns for unions in representing their members.
D) Unions are primarily economic in their focus, although they also engage in some political activities.

Question 79

In recent decades union members have:

A) increased as a percentage of wage and salary employees.
B) decreased as a percentage of wage and salary employees.
C) accounted for approximately 30 percent of wage and salary employees.
D) decreased as a percentage of wage and salary employees until the 1990s, when the percentage began to increase.

Question 80

In the public sector, government employees:

A) are not permitted to join unions.
B) that belong to unions have decreased dramatically.
C) that belong to unions exceed the number of private sector workers that are unionized.
D) that belong to unions now number over 65%.