Deck 12: Labor Markets

Question 1

In a perfectly competitive labor market,no individual firm's employment decision can affect the market wage because

A)union agreements prevent any firm from altering the wage rate
B)each firm is ignorant of the market wage rate
C)the demand for labor is a derived demand
D)each firm hires a very small portion of the labor services available
E)the wage rate is regulated by the government

Answer 1

each firm hires a very small portion of the labor services available

Question 2

Each of the following conditions,except one,must be satisfied in a perfectly competitive labor market.Which is the exception?

A)There are a large number of buyers of labor services.
B)Wages are the sole source of household income.
C)There are no barriers to entering the market.
D)There are a large number of sellers of labor services.
E)All workers appear the same to buyers of labor services.

Answer 2

Wages are the sole source of household income.

Question 3

A firm's labor demand curve is derived from the supply of the goods and services it produces.

Answer 3

False

Question 4

To say that the demand for labor is a derived demand means that

A)the quantity of labor is derived by the real wage rate
B)the demand for labor depends upon the demand for the product produced by labor
C)the supply of labor rises when the demand for labor falls
D)equilibrium in the resource market ensures there is equilibrium in the product market
E)changes in the demand for labor lead to changes in the demand for the product produced by labor

Question 5

Which of the following is an assumption made about a competitive labor market?

A)A firm must offer a higher wage rate to attract more labor.
B)A firm must offer a lower wage rate to attract more labor.
C)A firm cannot influence the market wage rate.
D)The labor supply curve facing each firm is inelastic.
E)Workers compete for jobs and firms pay a variety of wage rates.

Question 6

If the demand for automobiles increases,which of the following would also experience an increase in demand?

A)automobile workers
B)skateboards
C)bicycle manufacturers
D)ice cream
E)financial analysts

Question 7

A market in which resources are traded is known as a(n)

A)factor market
B)perfectly competitive market
C)open market
D)closed market
E)equilibrium market

Question 8

In a perfectly competitive labor market

A)all firms are wage takers
B)all firms are wage searchers
C)all firms sell their output at a constant price
D)none of the firms that demand labor can be monopolists
E)some firms may be able to influence the wage rate as long as most firms cannot

Question 9

In a perfectly competitive labor market,

A)some workers may be prevented from leaving the labor market
B)workers compete for employment opportunities
C)workers usually receive wages that are greater than their marginal revenue product
D)firms view all workers as being identical
E)there are relatively few sellers of labor services

Question 10

In factor markets,firms __________ and households ____________.

A)demand resources;supply resources
B)supply resources;demand resources
C)demand resources;demand goods
D)supply resources;demand goods
E)supply resources;supply goods

Question 11

In factor markets,

A)individual consumers are the demanders
B)equilibrium cannot be defined
C)there is an excess supply
D)firms are the demanders
E)labor and capital are viewed by firms as perfect substitutes

Question 12

Which of the following would prevent a labor market from being classified as perfectly competitive?

A)It is difficult for new workers to enter the market.
B)All workers have the same abilities.
C)Exiting the market is easy for workers who are currently in the market.
D)Both buyers and sellers of labor are well-informed about market conditions.
E)Each firm hires only a tiny fraction of the total labor in the market.

Question 13

A firm's labor demand curve is derived from the demand for the goods and services it produces.

Question 14

The most appropriate type of labor market to analyze

A)is the world market
B)is the national market
C)is a regional market
D)is a local market
E)depends upon the purpose of the analysis

Question 15

A firm that sells its output and hires its labor in perfectly competitive markets

A)controls the price of its output,but accepts the wage rate it pays as given
B)controls both the price of its output and the wage rate it pays
C)controls the rate it pays,but accepts the price of its output as given
D)accepts both the price of its output and the wage rate it pays as given
E)controls the price of its output,the wage rate it pays,and its own output level

Question 16

The perfectly competitive model is most likely to apply to a labor market in which

A)many well-informed firms must negotiate with one dominant labor union
B)there are a few firms,and they are uninformed about the attributes of each worker
C)there are many workers currently in the market who must negotiate with one dominant firm
D)there are many well-informed workers and firms,and each worker appears the same to firms
E)one dominant labor union must negotiate with one dominant firm

Question 17

A labor market differs from a product market because

A)in a labor market,firms are suppliers and households are demanders
B)the usual laws of economics do not apply to labor markets
C)supply and demand are only relevant for labor markets
D)supply and demand are only relevant for product markets
E)in a labor market,firms are demanders and households are suppliers

Question 18

The demand for labor curve depicts

A)a relationship between the price of a good and the quantity of labor necessary to produce different amounts of that good
B)a relationship between wages and profits in a firm
C)how the wage rate changes when the price of the good produced by labor changes
D)a relationship between the real wage rate and the quantity of labor demanded
E)how much labor will be hired at different profit levels

Question 19

Each of the following,except one,is a condition that characterizes a perfectly competitive labor market.Which is the exception?

A)Workers appear identical to firms.
B)Workers receive wages that are above their marginal revenue product (MRP).
C)There are no barriers to entering the labor market.
D)There are no barriers to exiting from the labor market.
E)There are many buyers of labor in the market.

Question 20

If a firm produces in a perfectly competitive output market,

A)then it demands its resources in perfectly competitive input markets
B)then it demands labor in a perfectly competitive labor market
C)the type of market in which it demands labor may be perfectly competitive or imperfectly competitive
D)the labor demand curve is the same as its product demand curve
E)the labor demand curve facing the firm is perfectly elastic

Question 21

Which of the following is true along the demand curve for labor?

A)The marginal cost of labor is constant.
B)The wage rate is constant.
C)The total cost of production is constant.
D)The quantity of labor demanded is constant.
E)The prices of all other inputs are constant.

Question 22

If the wage rate increases,there is an increase in the quantity of labor supplied.This means the labor supply curve shifts outward.

Question 23

The demand for labor is likely to decrease if

A)there is a rise in the demand for the good it produces
B)the price of a complementary input falls
C)the price of a substitute input rises
D)there is a decline in the demand for the good it produces
E)there is an increase in the number of firms in the market

Question 24

As baby boomers move into their retirement years,the incomes of geriatricians (doctors for the aged)will most likely

A)fall due to a fall in the demand for geriatricians
B)rise due to a fall in the price of complementary inputs
C)rise due to a rise in the demand for geriatricians
D)fall due to a drop in the number of medical providers
E)rise due to a rise in the supply of geriatricians

Question 25

An increase in the wage rate will cause the labor supply curve to shift to the right.

Question 26

All of the following,except one,would shift the demand curve for pizza makers to the right.Which is the exception?

A)a decrease in the wage rate of pizza makers
B)an increase in the demand for pizza
C)a decrease in the price of pizza ovens
D)an increase in the number of pizza parlors
E)an improvement in the technology of making pizza

Question 27

An increase in the wage rate will cause

A)increased employment
B)a leftward shift in the labor supply curve
C)an upward movement along the labor supply curve
D)a rightward shift of the labor supply curve
E)a leftward shift of the labor demand curve

Question 28

Which of the following could explain a movement from point F to point G in Figure 12-1?

A)an increase in the average reservation wage
B)a shift in tastes toward working in this labor market
C)an increase in the market wage in this labor market
D)an improvement in technology
E)an increase in the cost of training needed to work in this labor market

Question 29

Which of the following statements about a firm's demand curve for labor is true?

A)It shows the relationship between the price of output and the quantity of output demanded.
B)It usually has a negative slope.
C)It is perfectly inelastic.
D)It is derived from the labor supply curve.
E)It is parallel to the demand curve for the firm's product.

Question 30

In a perfectly competitive labor market,the market labor supply curve

A)will be horizontal
B)will be vertical
C)will be upward sloping
D)will be downward sloping
E)could be downward sloping if firms produce inferior goods

Question 31

The wage rate is constant along a firm's labor demand curve.

Question 32

The labor supply curve shows the relationship between the

A)wage rate and the total quantity of labor demanded by firms
B)wage rate and the total quantity of labor supplied by individuals
C)wage rate and the total quantity of labor supplied by firms
D)wage rate and the total quantity of labor demanded by individuals
E)marginal revenue product of labor and the marginal physical product of labor

Question 33

In a perfectly competitive labor market,if any one firm decreases the amount of labor it employs,the most likely result will be that the

A)market wage rate will rise
B)firm's revenue and cost will fall
C)market wage will fall
D)firm's revenue and cost will rise
E)firm's revenue will fall,but its cost will remain unchanged

Question 34

A change in the wage rate causes a firm's labor demand curve to shift.

Question 35

The demand for labor depends upon each of the following,except one.Which is the exception?

A)the level of technology
B)the quantity of labor available
C)the prices of complements to labor
D)the prices of substitutes for labor
E)the number of firms hiring in that labor market

Question 36

In a perfectly competitive labor market,the supply of labor curve facing a firm will be

A)horizontal
B)vertical
C)upward sloping
D)downward sloping
E)equal to its marginal revenue product curve

Question 37

The labor supply curve is obtained by

A)summing the slopes of the marginal revenue product curves for individual firms
B)summing the upward-sloping portions of individual workers' labor supply curves
C)summing all individual workers' labor supply curves at each wage
D)summing the downward-sloping portions of individual workers' labor supply curves
E)averaging all individual workers' labor supply curves at each wage

Question 38

As the market wage rate increases,it will exceed more individuals' reservation wage rates;this ensures the market supply of labor curve will be upward sloping.

Question 39

A firm's labor demand curve shows the relationship between the

A)wage rate and the quantity of labor supplied
B)marginal revenue product of labor and the marginal product of labor
C)wage rate and the quantity of labor demanded
D)marginal product of labor and the quantity of labor demanded
E)wage rate and the quantity demanded of the good produced by labor

Question 40

If both the market for a firm's output and the market in which it hires its labor are perfectly competitive,the firm's labor demand curve will be perfectly elastic.

Question 41

If the federal government initiated a program through which individuals could receive a tax break for acquiring additional training in selected fields,the

A)supply curve for labor in those fields would shift to the left
B)demand curve for labor in those fields would shift to the left
C)demand for the product produced in those fields would shift to the left
D)quantity of labor supplied would rise in response to wages
E)supply curve for labor in those fields would shift to the right

Question 42

The local labor market for lawn-mowing workers is initially in equilibrium.These workers are also able to clean swimming pools and have no preference for one job over the other.If the wage rate for pool cleaning rises,which of the following would occur in the lawn-mowing labor market?

A)Both labor demand and labor supply will drop,leading to a lower wage rate and lower employment.
B)Both labor demand and labor supply will rise,leading to a higher wage rate and lower employment.
C)Labor supply will drop,leading to a higher wage rate and lower employment.
D)Labor supply will drop,leading to a lower wage rate and lower employment.
E)Labor demand will drop,leading to a lower wage rate and lower employment.

Question 43

The labor supply curve is typically upward sloping because as the wage rate rises,

A)it will exceed the reservation wages of more individuals
B)the opportunity cost of leisure falls
C)the demand for the good produced by labor increases
D)the marginal revenue product of labor falls
E)the marginal revenue product of labor rises

Question 44

An increase in tuition rates for astronomy students would

A)decrease the wage rate for astronomers
B)cause the demand curve for astronomers to shift to the right
C)cause the demand curve for astronomers to shift to the left
D)lead to future reductions in the labor supply of astronomers
E)lead to a rise in the marginal revenue product of astronomers

Question 45

Which of the following groups of workers would be considered part of the short-run supply of court reporters in the Chicago area-labor market?

A)individuals in the Chicago area who are undergoing training as court reporters
B)trained court reporters in Indianapolis who are seeking information about relocating to Chicago
C)trained court reporters and individuals undergoing training in the Chicago area
D)unemployed,trained court reporters who are seeking work in an alternative field in the Chicago area
E)trained court reporters working or seeking work as court reporters in the Chicago area

Question 46

An increase in the cost of acquiring human capital will shift the labor supply curve to the left;eventually,this will tend to increase the equilibrium wage rate.

Question 47

An increase in the cost of acquiring human capital will shift the labor supply curve to the left;eventually,this will tend to decrease the equilibrium wage rate.

Question 48

The wage premium for the average college graduate (vs.the average high school graduate)has gone down significantly in recent years.

Question 49

Wage rates in other markets are assumed constant along the labor supply curve for a particular labor market.

Question 50

Which of the following could explain an increase in labor supply to a particular labor market?

A)a reduced preference for this type of work
B)a decrease in the size of the population
C)an increase in the number of firms in the market
D)a rightward shift of the marginal revenue product curve for labor at a typical firm
E)a reduction in wage rates for similar types of work

Question 51

The labor market for ultrasound technicians in Cleveland is initially in equilibrium.Which of the following would lead to a lower wage rate and higher employment in that market?

A)a drop in demand for diagnostic services at Cleveland hospitals
B)a drop in the price of ultrasound equipment
C)an increase in the length of training required for ultrasound technicians
D)a shift in potential workers' tastes away from hospital and clinical work
E)a wage decrease for ultrasound technicians in nearby cities

Question 52

As the wage rate increases for computer programmers,the

A)supply curve for computer programmers will shift to the right
B)supply curve for computer programmers will shift to the left
C)demand curve for computer programmers will shift to the left
D)minimum wage will fall in this labor market
E)supply curves for workers in similar industries will shift to the left

Question 53

Each of the following,except one,would lead to a rightward shift of the labor supply curve in a particular industry.Which is the exception?

A)increased preference for this type of work
B)increases in the demand for the good produced by labor
C)increases in the size of the population
D)reductions in the wage rates offered in alternative labor markets
E)reductions in the costs of acquiring human capital

Question 54

Figure 12-3 illustrates the marginal revenue product of labor and three possible labor supply curves facing a firm that hires industrial design engineers.The firm initially is in equilibrium at point e.Then,the government initiates a subsidy for the cost of training for new industrial design engineers,lowering the cost of training.Assume that the full impact of the change in training costs is indicated by one of the curves in the figure.After all long-run adjustments are made,this firm pays a wage

A)of $18 per hour and employs 29 industrial design engineers
B)of $26 per hour and employs 20 industrial design engineers
C)between $22 and $26 per hour,while employing less than 20 industrial design engineers
D)between $18 and $22 per hour,while employing more than 29 industrial design engineers
E)between $18 and $22 per hour,while employing between 25 and 29 industrial design engineers

Question 55

Which of the following could explain a movement from point F to point H in Figure 12-2?

A)decreased labor force participation rates
B)an increase in the market wage in an alternative labor market
C)a decrease in the price of a input substitutable for labor
D)a decrease in the number of years of training needed to work in this market
E)a decrease in the population in the geographic area of this market

Question 56

Figure 12-3 illustrates the marginal revenue product of labor and three possible labor supply curves facing a firm that hires industrial design engineers.The firm initially is in equilibrium at point e.Then,the cost of training rises for new industrial design engineers.Assume that the full impact of the change in training costs is indicated by one of the curves in the figure.After all long-run adjustments are made,this firm pays a wage

A)of $18 per hour and employs 29 industrial design engineers
B)of $26 per hour and employs 20 industrial design engineers
C)between $22 and $26 per hour,while employing less than 20 industrial design engineers
D)between $18 and $22 per hour,while employing more than 29 industrial design engineers
E)between $18 and $22 per hour,while employing between 25 and 29 industrial design engineers

Question 57

Which of the following could explain a decrease in labor supply to a particular labor market?

A)an increased preference for this type of work
B)a decrease in the size of the population
C)an increase in the number of firms in the market
D)a leftward shift of the marginal revenue product curve of labor at a typical firm
E)a reduction in wages rates for similar types of work

Question 58

A local labor market for lawn-mowing workers is initially in equilibrium.If researchers develop a new inexpensive grass seed that provides a lush,slow-growing lawn,which of the following will occur in the short run?

A)Both labor demand and labor supply will drop,leading to a higher wage rate but lower employment.
B)Both labor demand and labor supply will rise,leading to a lower wage rate and lower employment.
C)Labor demand will drop,leading to a lower wage rate and higher employment.
D)Labor supply will drop,leading to a higher wage rate and lower employment.
E)Labor demand will drop,leading to a lower wage rate and lower employment.

Question 59

The wage premium for the average college graduate (vs.the average high school graduate)has gone up significantly in recent years.

Question 60

Assume that the labor market for auto mechanics is initially in equilibrium.Which of the following would lead to an increase in both the wage rate and employment for auto mechanics?

A)a decrease in the price of a substitutable input
B)a decrease in the price of a complementary input
C)an increase in training costs for auto mechanics
D)a decrease in wages in an alternate labor market
E)a decrease in demand for the output of firms employing auto mechanics

Question 61

Jordan and Jennifer are musicians in New Orleans.Ezra is a musician thinking about moving to New Orleans.Which of the following statements is correct?

A)The wage needed to keep Jordan and Jennifer in the New Orleans music industry in the long run will be lower than the wage needed to keep them in the industry in the short run.
B)The costs of entering the New Orleans music industry are sunk costs for Jordan,Jennifer,and Ezra.
C)The costs of entering the New Orleans music industry are sunk costs for Ezra but not for Jordan and Jennifer.
D)The wage needed to induce Ezra to enter the New Orleans music industry will be lower than the wage needed to keep him in the industry after he enters.
E)The costs of entering the music industry in New Orleans are sunk costs for Jordan and Jennifer,but not for Ezra.

Question 62

For any resource it hires,a firm's marginal revenue product

A)is the change in the firm's total cost divided by the change in employment of that resource
B)equals the resource's marginal factor cost
C)equals marginal cost
D)is the change in the firm's total revenue divided by the change in employment of that resource
E)equals the change in the firm's marginal revenue

Question 63

Sally's Salon sells haircuts in a perfectly competitive market.As the salon hires additional workers,the marginal revenue product of labor

A)rises whenever the marginal product of labor falls
B)is equal to the market price of haircuts
C)falls whenever the marginal product of labor falls
D)varies only if the market price of haircuts varies
E)remains constant

Question 64

The additional output produced when one additional worker is hired is referred to as the __________ of labor.

A)marginal revenue product
B)marginal revenue
C)supply
D)marginal product
E)total revenue product

Question 65

The marginal product of labor

A)measures the contribution to total output of the average worker
B)is a characteristic of production,not of an individual worker
C)measures the personal productivity of the last worker hired
D)measures the extra revenue generated by the last worker hired
E)measures the extra cost attributed to the last worker hired

Question 66

Figure 12-6 shows the production function for a firm that sells its output in a perfectly competitive market where the market price is $20.Between the second and third workers,the marginal revenue product of labor equals

A)$200
B)$2,000
C)$600
D)$4,000
E)$1,200

Question 67

If eight workers can manufacture 70 tables per day and nine workers can manufacture 90 tables per day,

A)the marginal product of hiring the ninth worker is 20 tables
B)the marginal product of hiring the ninth worker is 10 tables
C)the marginal revenue associated with the ninth worker is $90 if nine tables sell for $10 each
D)there are diminishing marginal returns to labor,starting with the ninth worker
E)average revenue is rising

Question 68

Figure 12-5 shows the number of baseballs a manufacturer can produce each day with different quantities of labor.Each baseball sells for $5 in a competitive market.For which level of employment is the marginal product of labor is greatest?

A)1 worker
B)2 workers
C)3 workers
D)4 workers
E)5 workers

Question 69

If bicycles can be sold for $100 each,and the marginal product of hiring a third worker is 2 bicycles,then the marginal revenue product from hiring that worker is

A)2 bicycles
B)$200
C)$100
D)$1,000
E)$300

Question 70

Figure 12-5 shows the number of baseballs a manufacturer can produce per day with different quantities of labor.Each baseball sells for $5 in a competitive market.The total revenue per day for the firm if it employs five workers is

A)$500
B)$300
C)$2,200
D)$5,000
E)$2,500

Question 71

Both marginal revenue and marginal revenue product refer to the gains to the firm from employing one additional worker.

Question 72

An increasing marginal product of labor would be most commonly found

A)at high levels of employment
B)in perfect competition
C)at low levels of employment
D)when a product price is rising
E)when a product price is falling

Question 73

Figure 12-4 shows the number of calculators that can be produced daily by various numbers of workers.What is the marginal product of hiring the fifth worker?

A)60 calculators
B)40 calculators
C)280 calculators
D)300 calculators
E)20 calculators

Question 74

The marginal approach to profit

A)says that a firm should take any action that adds more to cost than it adds to revenue
B)says that a firm should take any action that adds more to revenue than it adds to cost
C)says that a firm should strive to set profit equal to zero.
D)says that a firms profit is maximized when average revenue equals average cost
E)says that profit should be marginalized

Question 75

The presence of diminishing marginal returns to labor leads to decreasing marginal revenue product of labor and a downward-sloping demand for labor curve.

Question 76

If a firm is experiencing diminishing marginal returns to labor,

A)the additional increments to output become smaller as more labor is used
B)total output falls as more labor is used
C)total output remains constant as more labor is used
D)additional increments to output rise as more labor is used
E)total revenue falls as more labor is used

Question 77

Amos is a baker in Tucson.Which of the following statements is correct?

A)The wage needed to keep Amos in the bakery industry in Tucson in the long run is lower than the wage needed to keep him in the industry in the short run.
B)The costs of entering the bakery industry in Tucson are sunk costs and therefore those costs shouldn't be a consideration in Amos's decision to stay in the industry.
C)The wage needed to keep Amos in the bakery industry in Tucson in the short run is lower than the wage needed to keep him in the industry in the long run.
D)The wage needed to keep Amos in the bakery industry in Tucson in the long run is not important -- only the short-run wages are relevant.
E)The costs of entering the bakery industry in Tucson are sunk costs and therefore those costs should be considered in Amos's decision to stay in the industry.

Question 78

The term marginal revenue product (MRP)refers to the change in output if an additional worker is employed.

Question 79

For a firm producing in a perfectly competitive product market,the marginal revenue product of labor eventually

A)falls due to diminishing marginal returns to labor
B)rises due to diminishing marginal returns to labor
C)falls due to a falling product price
D)falls due to a rising product price
E)rises due to falling marginal productivity of labor

Question 80

The marginal revenue product (MRP)of labor is the

A)total revenue generated when one more worker is hired
B)change in average revenue when one more worker is hired
C)total revenue per worker when one more worker is hired
D)change in total revenue when one more worker is hired
E)change in employment when total revenue changes by one dollar