Deck 10: The Supply and Demand for Labor

Question 1

The following questions are based on the following information for a firm under conditions of perfect competition:

If the price of the product is $5 per unit and the firm must pay $40 per worker employed,how many workers should the firm hire to maximize profits?

A) 10
B) 11
C) 12
D) 13
E) 14

Answer 1

E

Question 2

Blue-collar workers make up approximately ________ percent of the labor force in the United States.

A) 5
B) 15
C) 33
D) 50
E) 80

Answer 2

B

Question 3

For an employer,profits are maximized when the

A) price of the product exceeds the price of labor.
B) marginal product of labor is greater than its price.
C) price of labor equals the price of all other inputs.
D) value of labor's marginal product is equal to the price of the product.
E) price of labor equals the value of its marginal product.

Answer 3

E

Question 4

The following questions are based on the following information for a firm under conditions of perfect competition:

If the price of labor increases to $50 per worker and the price of the product remains at $5 per unit,how many workers should the firm hire to maximize profits?

A) 10
B) 11
C) 12
D) 13
E) 14

Question 5

The following questions are based on the following information for a firm under conditions of perfect competition:

The demand curve for labor slopes downward because of the falling

A) marginal product of labor.
B) supply of labor.
C) employment of labor.
D) costs of production.
E) importance of labor.

Question 6

In general,a firm should employ additional units of labor as long as

A) they are willing to work.
B) their wages exceed the value of their marginal product.
C) their wage rates do not change.
D) they add at least as much to revenues as they do to costs.
E) production is functioning.

Question 7

If a worker costs $75 per day and adds 1,500 units to output,the firm should employ that worker when the price of the product is at or above ________ per unit.

A) $.01
B) $.02
C) $.03
D) $.04
E) $.05

Question 8

The following questions are based on the following information: The marginal product of an additional unit of labor is 100 units per day and the market price of this output is $0.75 per unit.
What is the value of labor's marginal product?

A) 75 units
B) 100 units
C) $0.75
D) $75
E) $133

Question 9

The real wage

A) equals the amount of goods and services that can be bought with the money wage.
B) is the amount of money received per unit of time.
C) unlike the money wage, is unaffected by changes in the price level.
D) rises faster than the money wage as the price level rises.
E) is the money wage adjusted for changes in real output.

Question 10

The money wage adjusted for the price level is called

A) salary.
B) compensation.
C) value added.
D) the value of the marginal product.
E) the real wage.

Question 11

The price of labor services is generally called

A) profits.
B) capital.
C) an occupation.
D) wages.
E) employment.

Question 12

The following questions are based on the following information for a firm under conditions of perfect competition:

A firm's demand curve for labor is

A) backward bending, especially in the short run.
B) its value of labor's marginal product curve.
C) equal to the price of labor times its productivity.
D) calculated by dividing total output per day by the number of workers.
E) derived from the supply of labor.

Question 13

The marginal product of labor multiplied by the price of the product produced is called the

A) value of the marginal product of labor.
B) firm's supply curve of labor.
C) revenue possibilities curve of labor.
D) capitalization of labor curve.
E) labor productivity curve.

Question 14

Determination of the price of labor under perfect competition is based on the assumption that

A) labor is the sole input in the production process.
B) buyers of labor are output maximizers.
C) prices of inputs and outputs are taken by firms as given.
D) the supply curve of labor slopes upward.
E) all occupations are equally desirable.

Question 15

The following questions are based on the following perfectly competitive firm's demand curve for labor:

If this is a profit-maximizing firm and it currently employs five workers,the value of the marginal product of the fifth worker is

A) $5.
B) $40.
C) $50.
D) $200.
E) not determinable from the information given.

Question 16

If the cost to the firm of hiring this unit of labor (wages,Social Security,and other payroll taxes)is $12 per hour for an eight-hour day,a profit-maximizing firm

A) should hire the additional unit of labor.
B) should not hire this extra unit.
C) should hire this person for half a day.
D) should hire this extra unit of labor plus one more.
E) There is not enough information available to determine the optimal number of workers.

Question 17

Which sequence correctly ranks (from highest to lowest)the average weekly earnings of workers in the industries listed?

A) services, construction, manufacturing
B) construction, services, manufacturing
C) manufacturing, services, construction
D) construction, manufacturing, services
E) services, manufacturing, construction

Question 18

The value of the marginal product is the same as the change in

A) output from hiring one more unit of input.
B) revenue from selling one more unit of output.
C) cost from hiring one more unit of input.
D) revenue from one additional dollar of cost.
E) revenue from hiring one more unit of input.

Question 19

In a perfectly competitive market,it pays the profit-maximizing firm to employ another unit of an input as long as the

A) price of the input is less than the price of the product produced.
B) price of the input exceeds the price of the product produced.
C) marginal product of the input exceeds the price of the product.
D) value of the marginal product of the input exceeds the product's price.
E) increase in the firm's costs are less than the price of the output times the increase in total product.

Question 20

The following questions are based on the following information for a firm under conditions of perfect competition:

The inverse relationship between the price of labor and the amount of labor used is called the

A) labor production possibilities curve.
B) demand curve for labor.
C) total fixed cost curve.
D) money wage nexus.
E) employment function.

Question 21

Which of the following is the best example of derived demand?

A) Advertising creates a demand for a new product.
B) Increased oil prices reduce the demand for large automobiles.
C) An increase in wages causes firms to substitute capital for labor.
D) A decrease in the demand for grapes reduces the demand for grape pickers.
E) The market demand schedule is derived by summing all individual demand curves.

Question 22

The following questions are based on the following perfectly competitive firm's demand curve for labor:

This firm would hire no labor if the price per day rose above

A) $6.
B) $30.
C) $40.
D) $60.
E) $80.

Question 23

The demand for labor (and other inputs),not as ends in themselves but as means to produce other things,is called ________ demand.

A) derived
B) aggregate
C) complementary
D) transactions
E) exogenous

Question 24

Under perfect competition,the supply curve of labor or other inputs to an individual firm is

A) horizontal.
B) backward bending.
C) downward sloping.
D) vertical.
E) identical with the market supply curve of the input.

Question 25

Wage differentials that persist in labor markets because of the inability of individuals to gain the training necessary to enter highly paid occupations are an example of

A) noncompeting groups.
B) a derived demand.
C) perfectly competitive homogeneous labor markets.
D) a bilateral involvement.
E) a marginal attachment.

Question 26

If the actual wage is $5,there will be

A) downward pressure on the wage because of the excess supply of labor.
B) no tendency toward change because $5 is the equilibrium wage.
C) upward pressure on the wage because the labor supply function is horizontal.
D) upward pressure on the wage because of the excess demand for labor.
E) a reduction in the supply of labor.

Question 27

After some point,increased real wage rates that make people richer cause the supply curve of labor to

A) become horizontal.
B)shift to the right.
D) remain vertical.
C) fluctuate unpredictably.
E) bend backward.

Question 28

Approximately ________ percent of nonfarm workers in the United States are union members.

A) 80
B) 60
C) 40
D) 20
E) 10

Question 29

The following questions are based on the following perfectly competitive firm's demand curve for labor:

The firm would hire three workers if the wage of a worker were between

A) $31 and $40.
B) $41 and $50.
C) $51 and $60.
D) $61 and $70.
E) $71 and $80.

Question 30

The existence of noncompeting groups and other occupational differences in labor markets means that

A) homogeneous, competitive labor markets are possible in the short run.
B) the government must step in to ensure that enough people enter unskilled occupations.
C) the market demand curves for all labor groups are highly price inelastic.
D) wage differentials will tend to persist over time.
E) wages have little or no effect on the supply curves of labor.

Question 31

In a perfectly competitive economy,individuals would be paid according to their

A) age and seniority.
B) physical ability.
C) education.
D) race or gender.
E) contribution to production.

Question 32

The following questions are based on the following graph depicting a perfectly competitive labor market:

This is an equilibrium because

A) no worker wishes to work for a lower wage.
B) a higher wage would produce an excess supply; a lower wage would produce an excess demand.
C) at a wage above this, employers are not willing to hire any workers.
D) this wage is consistent with union ambitions.
E) higher or lower wages generate shifts in the supply and demand curve to restore that wage.

Question 33

The demand for labor and other inputs is a derived demand because

A) as the price rises, the quantity demanded falls.
B) under certain conditions it is backward bending.
C) the firm's demand curve for labor is derived from the market demand curve for labor.
D) inputs are demanded to produce other things and not as an end in themselves.
E) workers derive income from working.

Question 34

The phenomenon of the backward-bending market supply curve for labor

A) indicates the declining quality of labor as unemployment decreases.
B) reflects the policy of labor unions.
C) results from falling worker productivity as income increases.
D) results from workers' increased preference for work as wage rates rise.
E) indicates a worker's desire to buy more leisure as income rises.

Question 35

The market demand curve for labor

A) derives employment totals from the amounts supplied.
B) shows, for each price, the quantity of labor demanded in the entire market.
C) will be horizontal if the market is perfectly competitive.
D) relates the quantity of labor demanded to the product price.
E) may slope upward due to external diseconomies.

Question 36

An input with a price-inelastic demand for its services

A) has few close substitutes.
B) has a backward-bending supply curve.
C) produces a product for which the demand is perfectly elastic.
D) has a high market price.
E) has a value of the marginal product curve that is horizontal.

Question 37

The fact that surgeons receive higher hourly wages than school teachers reflects the

A) higher hourly value of a surgeon's marginal product.
B) shortage of school teachers.
C) surplus of surgeons.
D) longer hours worked by surgeons.
E) incompetence of school teachers.

Question 38

The following questions are based on the following graph depicting a perfectly competitive labor market:

The equilibrium wage is

A) 0W₁.
B) 0W₂.
C) 0W₃.
D) 0W₄.
E) 0W₅.

Question 39

The basic difference between the market supply curve of an input and the supply curve of an input to a single perfectly competitive firm is that

A) demand by a single firm can influence the input supply curve, but market demand cannot influence market supply.
B) a single competitive firm always faces a backward-bending input supply curve, whereas the market supply curve infrequently bends backward.
C) the input supply curve for a single firm is perfectly elastic, a condition rarely, if ever, observed in a market supply curve.
D) the input supply curve for a perfectly competitive firm rises more rapidly than the market supply curve.
E) There is no difference; the two supply curves are identical.

Question 40

The market supply curve of labor

A) shifts outward when output expands in the market.
B) relates the price of labor to the total amount of labor supplied in the market.
C) increases with product price.
D) is perfectly elastic under perfect competition.
E)generally slopes downward to the right.

Question 41

A court action that minimizes union power is the

A) checkoff.
B) yellow dog contract.
C) lockout.
D) injunction.
E) strike.

Question 42

The practice of featherbedding may be viewed as a(n)

A) decrease in the wage, causing an excess demand for labor.
B) decrease of the labor demand curve.
C) increase in the wage, causing an excess supply of labor.
D) increase of the labor demand curve.
E) increase of the labor supply curve.

Question 43

The first major piece of pro-labor legislation in the 1930s that made it more difficult for courts to issue injunctions against striking or picketing was the ________ Act.

A) Wagner
B) Taft-Hartley
C) Norris-La Guardia
D) Landrum-Griffin
E) Magna Carta

Question 44

Unions try to shift the demand curve for labor to the right by

A) raising wages.
B) favoring legislation to shorten working hours.
C) featherbedding.
D) promoting right-to-work laws.
E) limiting union membership.

Question 45

A labor organization set up in a specific geographic area or plant is called a

A) national union.
B) closed shop.
C) cartel.
D) company union.
E) local union.

Question 46

The Taft-Hartley Act

A) established the eight-hour workday and additional pay for overtime work.
B) was intended to redress the balance between labor and employers.
C) makes it an unfair labor practice for employers to refuse to bargain collectively with unions.
D) outlaws lockouts, the checkoff, and yellow dog contracts.
E) protects union members from abuse by union leaders.

Question 47

The AFL-CIO is

A) a loose affiliation of small local unions.
B) a powerful management-sponsored organization designed to bargain with large national labor unions.
C) a government agency to mediate labor-employer disputes.
D) a federation of national unions that serves as a spokesperson for the U.S. labor movement.
E) the governing body of all U.S. labor unions.

Question 48

To raise wages,labor unions can force a shift in the labor supply curve by

A) being willing to work longer hours as wage rates rise.
B) favoring legislation to reduce immigration.
C) negotiating an increase in wages.
D) encouraging an increase in union membership.
E) increasing the demand for the final product.

Question 49

A union that negotiates higher wages without directly limiting the labor supply or trying to increase labor demand

A) creates an excess demand for labor.
B) has the effect of creating a price floor in that labor market.
C) is able to secure jobs for all of its members.
D) violates the Landrum-Griffin Act.
E) is guilty of a lockout.

Question 50

Unions regularly encourage Congress to reduce both immigration and working hours because unions want to

A) shift the supply curve for labor to the left.
B)shift the demand curve for labor to the right.
C) promote the unemployment of nonunion members.
D) encourage the importation of consumer goods from abroad.
E) stimulate the introduction of labor-saving machinery.

Question 51

Which of the following protects union members from abuse by union leaders?

A) Norris-La Guardia Act
B) Lewis Act
C) Taft-Hartley Act
D) Landrum-Griffin Act
E) Wagner Act

Question 52

The largest national union in the United States is the

A) Teamsters.
B) National Education Association.
C) United Auto Workers.
D) AFL-CIO.
E) American Association of Federal, County, and Municipal Employees.

Question 53

The purpose of the Landrum-Griffin Act is to

A) outlaw the closed shop.
B) eliminate the checkoff system.
C) ban yellow dog contracts.
D) make it an unfair labor practice for employers to refuse to bargain collectively with unions representing a majority of their workers.
E) protect the rights of individual union members from abuse by union leaders.

Question 54

A yellow dog contract is an agreement

A) by labor not to strike.
B) by employers not to participate in a lockout.
C) in which a worker agrees not to join a union.
D) to engage in pattern bargaining.
E) not to seek injunctions to prevent strikes and lockouts.

Question 55

The period during which union membership achieved its most spectacular growth was the

A) 1910s.
B) 1920s.
C) 1930s.
D) 1950s.
E) 1960s.

Question 56

One function of the National Labor Relations Board is to

A) sanction strikes.
B) set wages and working conditions.
C) control the composition of the AFL-CIO.
D) hold elections to determine which, if any, union would represent various groups of employees.
E) enforce compliance with the so-called American Labor Plan.

Question 57

The purpose of right-to-work laws is to outlaw

A) yellow dog contracts.
B) open shops.
C) union shops.
D) closed shops.
E) lockouts.

Question 58

Under which condition is the checkoff legal?

A) the worker must agree in writing
B) there must be a closed shop
C) there must be a yellow dog contract
D) the union must have sufficient funds to cover the check
E) the union must mandate it as a condition of membership

Question 59

The supreme governing body of the national union is the

A) AFL-CIO.
B) local government.
C) executive council.
D) National Labor Relations Board.
E) convention.

Question 60

Efforts by a union representative to organize a union are protected from employer interference by the ________ Act.

A) Taft-Hartley
B) Landrum-Griffin
C) Norris-La Guardia
D) Sherman
E) Wagner

Question 61

In the early 1900s,managers generally refused to grant wage increases to garment workers because

A) they were already paying all that their firms could afford and still remain solvent.
B) they could get all the workers they wanted at the wages they were paying.
C) most workers were unskilled and covered by the minimum wage law.
D) workers were compensated in other ways, such as with free housing and medical care.
E) garment workers were already among the highest-paid skilled labor.

Question 62

In a union shop,workers

A) must be union members before they can be hired.
B) need not be union members to work.
C) must become union members within a certain period of time once they have been hired.
D) are not able to strike under any circumstances.
E) sign yellow dog contracts before they begin work.

Question 63

One reason current European unemployment rates are significantly above those in the United States is that European

A) labor laws seem designed mainly to protect the higher wages received by mostly male workers in the 25- to 54-year age bracket.
B) countries typically have less generous social welfare benefits than those in the United States.
C) inflation-adjusted labor costs have risen less rapidly than those in the United States over the last 30 years.
D) workers are more productive than U.S. workers.
E) countries import most of the goods they consume.

Question 64

In recent years the composition of the labor force has reflected an increasing proportion of ________ workers.

A) white-collar
B) blue-collar
C) skilled
D) male
E) unionized

Question 65

Of those listed below,the main factor contributing to the downfall of the New York Herald Tribune was

A) poor management.
B) the fear of new technology among union representatives.
C) an unwillingness by the newspaper to install new technology.
D) an unwillingness of Tribune representatives to compromise.
E) competition from the Times, News, and Post.

Question 66

In a closed shop,workers

A) must be union members before they can be hired.
B) need not be union members to work.
C) must become union members within a certain period of time once they have been hired.
D) are not able to strike under any circumstances.
E) sign yellow dog contracts before they begin work.

Question 67

The main reason for the current trend toward a growing spirit of cooperation between unions and management is

A) that there is significant union presence on corporate boards of directors.
B) that about half of all American workers now belong to unions, so management is more inclined to listen.
C) the lack of urgency in meeting demands, since most workers now enjoy comfortable wages and working conditions.
D) a desire to survive in a highly competitive economy under increasing pressure from foreign competition.
E) the passage of new federal labor laws that now require cooperation under threat of federal intervention.

Question 68

Employers are more likely to accept union demands when

A) income, employment, output, and sales levels are high.
B) there is significant competition from foreign firms.
C) they have the strength to ride out a strike.
D) the economy is in a recession.
E) unions face significant competition from nonunionized workers.

Question 69

Union membership,as a percentage of the total U.S.labor force

A) has declined fairly steadily for about 30 years now.
B) has stayed about the same since the turn of the century.
C) has grown slightly since the 1930s.
D) has grown rapidly since the 1930s.
E) declined from the early 1950s to the 1970s but is now growing slowly.

Question 70

A significant feature of many collective bargaining contracts in the late 1980s was the

A) negotiation of wage settlements that encouraged supply-side inflation.
B) emergence of many more closed shop agreements.
C) rejection of two-tier wage structures.
D) decertification of national unions in favor of local representation.
E) ease with which labor unions agreed to concessions.

Question 71

In an open shop,workers

A) must be union members before they can be hired.
B) need not be union members to work.
C) must become union members within a certain period of time once they have been hired.
D) are not able to strike under any circumstances.
E) sign yellow dog contracts before they begin work.

Question 72

A major union weapon to force a favorable settlement is the threat of

A) a lockout.
B) an open shop.
C) featherbedding.
D) a strike.
E) collective bargaining.

Question 73

The negotiation between union and management over wages and working conditions is called

A) union-shop bargaining.
B) arbitration.
C) disinterested mediation.
D) labor relations.
E) collective bargaining.