Deck 12: Labor Markets and Labor Unions

Question 1

Individuals achieve maximum utility in the allocation of their time when _____

A)any change in their use of time reduces their total satisfaction.
B)they consciously and carefully weigh the expected marginal utilities per unit.
C)they consciously and carefully weigh the actual marginal utilities per unit of time spent in each activity.
D)the expected average utility of each activity is equal.
E)people make a concerted effort to measure satisfaction.

Answer 1

A

Question 2

Work is an attractive use of your time _____

A)if the utility of consumption made possible by work exceeds the disutility of work itself.
B)whenever you are paid a wage less than the minimum wage.
C)whenever the marginal utility you derive from the consumption made possible through work is zero.
D)unless time spent working is a source of disutility.
E)only when marginal utility is positive for an additional unit of leisure.

Answer 2

A

Question 3

Abby maximizes utility by allocating her time among leisure,market work,and nonmarket work so that the _____

A)total utility of each is equal.
B)average utility of each is equal.
C)total utility per hour of each is equal.
D)marginal utility per hour of each is equal.
E)maximum amount of goods and services can be acquired.

Answer 3

D

Question 4

A college dean has a _____ opportunity cost of _____ than a college student working a minimum-wage job.

A)lower; leisure
B)lower; nonmarket work
C)lower; market work
D)higher; nonmarket work
E)higher; market work

Question 5

Market work includes activities such as _____

A)practicing your golf game.
B)studying for an economics exam.
C)teaching an economics course in a college.
D)picking up empty cans for the bottle deposit.
E)picking strawberries for your own use.

Question 6

A college student working in a minimum-wage job has a _____ opportunity cost of _____ than a college dean.

A)lower; market work
B)lower; leisure
C)higher; market work
D)higher; nonmarket work
E)higher; leisure

Question 7

Leisure is _____

A)not subject to the law of diminishing utility, because you can never have enough leisure time.
B)not subject to the law of diminishing utility, because you can derive utility only from goods and services.
C)subject to the law of diminishing utility, just like the consumption of goods and services.
D)subject to the law of diminishing utility only if it involves the consumption of goods and services.
E)not considered in maximizing utility.

Question 8

People who earn higher market wages _____

A)have a greater net utility associated with nonmarket work.
B)have a lower opportunity cost of leisure.
C)are less likely to perform nonmarket work.
D)are more likely to view leisure as an inferior good.
E)experience less disutility associated with market work.

Question 9

People who gain greater enjoyment from leisure activities _____

A)allocate more time to leisure.
B)allocate more time to market work.
C)allocate more time to nonmarket work.
D)generally earn higher market wages.
E)generally earn lower market wages.

Question 10

People make mistakes in allocating their time _____

A)only when leisure time is an inferior good.
B)because the future is uncertain.
C)only when economists remove the ceteris paribus assumption.
D)only when economists remove the assumption that individuals are rational.
E)because information is free and readily available.

Question 11

People who are more productive in nonmarket work _____

A)produce more for themselves.
B)spend less time engaged in nonmarket work.
C)work fewer hours in market work and enjoy more leisure.
D)spend more time engaged in market work.
E)are attracted to market employment at lower wages.

Question 12

Which of the following lists the three ways people use their time?

A)market work, selling labor in the labor market, and leisure
B)producing their own goods and services, nonmarket work, and market work
C)nonwork, work, and leisure
D)market work, nonmarket work, and leisure
E)market work, nonwork, and leisure

Question 13

Nonmarket work includes _____

A)time spent producing goods and services for your employer.
B)time spent pursuing hobbies and crafts.
C)time spent engaging in strenuous physical exercise to reduce your weight.
D)time spent producing goods and services for your own consumption.
E)time spent managing your own firm.

Question 14

The quantity of labor an individual supplies to the labor market _____

A)always increases as the market wage rate rises.
B)is contingent upon the wage rate offered in the labor markets.
C)always decreases as the market wage rate rises.
D)could never be zero over the realistic range of wage rates.
E)depends only on the opportunity cost of the individual's time in other labor markets.

Question 15

Jamal maximizes utility by allocating his time among leisure,market work,and household work so that _____

A)expected marginal utility is equal among all three.
B)expected total utility per hour is equal among all three.
C)expected marginal utility per hour is equal among all three.
D)the maximum amount of goods and services can be acquired.
E)expected total utility of each use is equal.

Question 16

Over the realistic range of wages,under which of the following circumstances will Sam be supplying a quantity of labor greater than zero to the labor market?

A)when he is performing nonmarket work
B)when he has not been hired to do the job
C)when he is willing and able to perform the job at the going market wage rate
D)when he is unable to perform the job
E)when he is unwilling to perform the job

Question 17

People make mistakes in allocating their time _____

A)because they always act irrationally.
B)despite always having expectations fulfilled.
C)only when leisure is a normal good.
D)because acquiring information is costly.
E)more often when the cost of making a mistake is high.

Question 18

Leisure includes activities such as _____

A)practicing your golf game.
B)studying for a final exam.
C)teaching an economics course in a college.
D)working on your car at home.
E)babysitting for a fee.

Question 19

Which of the following is not a form of nonmarket work?

A)working on your car at home
B)doing your laundry in a laundromat
C)making bread for a dinner party at your sister's house
D)caring for your sister's children as a favor
E)babysitting for a fee

Question 20

People who earn higher market wages,other things constant,will _____

A)always provide more labor to nonmarket work so that they can acquire more skills.
B)be more inclined to supply their labor to market work than to nonmarket work.
C)be more inclined to supply their labor to nonmarket work than to market work.
D)attempt to allocate time such that the total utility from each activity is maximized.
E)attempt to maximize utility by allocating time so that the total utility of the last unit of time spent in each activity is identical.

Question 21

Exhibit 12.1

Refer to Exhibit 12.1,which shows a backward-bending labor supply curve for an individual.Along which part of the labor supply curve in the figure below does the income effect of a wage change just equal the substitution effect?

A)between points a and b
B)between points a and c
C)between points b and c
D)between points b and d
E)between points c and d

Question 22

The average workweek in the United States has declined to fewer than 40 hours even though wage rates have been increasing.The best explanation for this phenomenon is that _____

A)the labor supply curve shifted to the right.
B)the labor demand curve shifted to the right.
C)the income effect of rising wages outweighed the substitution effect.
D)the substitution effect of rising wages outweighed the income effect.
E)the labor supply curve is linear and upward sloping.

Question 23

If nonmarket work is a normal good,then those earning a higher income allocate _____ time to _____.

A)less; market work
B)less; leisure
C)more; market work
D)more; leisure
E)more; nonmarket work

Question 24

The income and substitution effects of a change in the wage rate _____

A)always work in the same direction.
B)always work in opposite directions.
C)work in opposite directions only if the wage decreases.
D)work in the same direction only if the wage increases.
E)work in the same direction only if the wage decreases.

Question 25

Which of the following statements would be represented by a backward-bending labor supply curve?

A)A $50,000-a-year professor works more hours than a $20,000-a-year professor.
B)The CEO of a major computer manufacturer works more hours than the union workers.
C)The owners of a successful business work fewer days than their employees.
D)Hospital janitors work fewer hours than the chief of obstetrics.
E)High-ranking executives are more likely to work past 5:00 p.m. than middle-level managers.

Question 26

Because leisure is a normal good,an increase in income _____

A)decreases the demand for leisure time and reduces the amount of time allocated to market work.
B)decreases the demand for leisure time and increases the amount of time allocated to market work and nonmarket work.
C)increases the demand for leisure time and reduces the amount of time allocated to market work and nonmarket work.
D)increases the demand for leisure time and increases the amount of time allocated to market work and nonmarket work.
E)has no impact on the demand for leisure time.

Question 27

The substitution effect of a decrease in the wage rate causes the quantity of labor supplied to _____

A)always increase.
B)increase only if the individual desires more leisure time.
C)increase only if the substitution effect outweighs the income effect.
D)always decrease.
E)decrease only if the individual lowers the value of leisure time.

Question 28

Exhibit 12.1

Refer to Exhibit 12.1 which shows a backward-bending labor supply curve for an individual.Along which part of the labor supply curve in the figure below does the income effect of a wage change outweigh the substitution effect?

A)between points a and b
B)between points a and c
C)between points b and c
D)between points b and d
E)between points c and d

Question 29

The substitution effect of an increase in the wage rate will _____

A)always lead to an increase in the quantity of labor supplied.
B)always lead to a decrease in the quantity of labor supplied.
C)lead to an increase in the quantity of labor supplied only if leisure is a normal good.
D)lead to an increase in the quantity of labor supplied only if leisure is not a normal good.
E)lead to an increase in the quantity of labor supplied only if the income effect works in the same direction.

Question 30

As the wage rate decreases,the amount of time spent on market work _____

A)increases if the income effect dominates the substitution effect.
B)increases because of the substitution effect.
C)decreases because of the income effect.
D)decreases if the income effect dominates the substitution effect.
E)decreases if the substitution effect dominates the income effect.

Question 31

If leisure is a normal good,then a decrease in income _____ the time allocated to _____.

A)decreases; market work
B)decreases; leisure
C)decreases; nonmarket work and market work
D)increases; leisure
E)increases; market work, nonmarket work, and leisure

Question 32

People generally view leisure as _____

A)an inferior good.
B)a normal good.
C)a source of disutility.
D)being more valuable per unit, the more they have of it.
E)being unrelated to utility maximization.

Question 33

The substitution effect of a change in the wage rate refers to _____

A)substituting leisure for work as the wage rate rises.
B)substituting market work for nonmarket work as the wage rate falls.
C)working more hours as the wage rate falls.
D)working fewer hours as the wage rate rises.
E)substituting market work for leisure or nonmarket work as the wage rate rises.

Question 34

If the substitution effect is always greater than the income effect,then an individual's labor supply curve will _____

A)bend backward.
B)always have a positive slope.
C)always have a negative slope.
D)be vertical.
E)be horizontal.

Question 35

Along a backward-bending labor supply curve,the _____

A)income effect always dominates the substitution effect.
B)substitution effect always dominates the income effect.
C)substitution effect is always equal to the income effect.
D)substitution effect dominates the income effect at high wage rates.
E)substitution effect dominates the income effect at low wage rates.

Question 36

Exhibit 12.1

Refer to Exhibit 12.1,which shows a backward-bending labor supply curve for an individual.Along which part of the labor supply curve in the figure below does the substitution effect of a wage change outweigh the income effect?

A)between points a and b
B)between points a and c
C)between points b and c
D)between points b and d
E)between points c and d

Question 37

At a low wage rate,_____

A)there is usually no substitution effect.
B)there is usually no income effect.
C)the substitution effect usually outweighs the income effect.
D)the income effect usually outweighs the substitution effect.
E)the disutility of market work is usually high.

Question 38

The income effect of a decrease in the wage rate causes the quantity of labor supplied to _____

A)always increase.
B)increase only if the individual desires more leisure time.
C)increase only if the substitution effect outweighs the income effect.
D)always decrease.
E)decrease only if the substitution effect is weaker than the income effect.

Question 39

For a typical person who is currently earning a low wage rate,the _____

A)substitution effect of a wage increase is usually stronger than the income effect.
B)substitution effect of a wage increase is usually weaker than the income effect.
C)income effect of a wage increase usually is zero.
D)substitution effect of a wage increase usually is zero.
E)substitution and income effects of a wage increase tend to work in the same direction.

Question 40

An increase in the wage rate will lead to a reduction in the quantity of labor supplied if _____

A)the substitution effect outweighs the income effect.
B)the income effect outweighs the substitution effect.
C)the opportunity cost of leisure does not increase.
D)the opportunity cost of working always increases.
E)workers are irrational because otherwise they would be violating the law of supply.

Question 41

A stock market crash that reduces the value of an individual's trust fund will tend to _____

A)increase his or her supply of labor if the substitution effect outweighs the income effect.
B)decrease his or her supply of labor if the substitution effect outweighs the income effect.
C)have no impact on his or her labor supply.
D)increase his or her labor supply.
E)decrease his or her labor supply.

Question 42

The market labor supply curve is usually _____ over the relevant range of market wage rates.

A)positively sloped
B)negatively sloped
C)backward bending
D)vertical
E)horizontal

Question 43

Exhibit 12.2

Refer to Exhibit 12.2,which shows a backward-bending labor supply curve for an individual.In the figure below,which of the following is true if the wage rate decreases from $14 to $6 per hour?

A)The income effect dominates the substitution effect.
B)The substitution effect dominates the income effect.
C)No labor is supplied.
D)The income effect equals the substitution effect.
E)The supply curve is horizontal.

Question 44

Exhibit 12.2

Refer to Exhibit 12.2,which shows a backward-bending labor supply curve for an individual.In the figure below,which of the following is true at a wage rate of $14?

A)The income effect dominates the substitution effect.
B)The substitution effect dominates the income effect.
C)No labor is supplied.
D)The income effect equals the substitution effect.
E)The supply curve is horizontal.

Question 45

For wage rates between $7 and $15 per hour,Ali's labor supply curve is backward bending,Ben's labor supply curve is upward sloping,and Charlie's supply curve is vertical at 10 hours of labor supplied.If these three people are the only ones supplying labor in this labor market,then the market labor supply curve will be the sum of the _____

A)labor supply curves of Ali, Ben, and Charlie at each wage rate.
B)upward-sloping portions of Ben's and Ali's labor supply curves.
C)downward-sloping portions of the individual labor supply curves.
D)average of all individual labor supply curves.
E)individual labor supply curves at each net utility for market work.

Question 46

A large inheritance from a relative will tend to _____

A)cause a movement up and to the right along the individual's labor supply curve.
B)cause a movement down and to the left along the individual's labor supply curve.
C)shift the individual's labor supply curve outward.
D)shift the individual's labor supply curve inward.
E)make the income effect of a wage increase positive.

Question 47

Exhibit 12.3

Refer to Exhibit 12.3 which shows a backward-bending labor supply curve for an individual.In the figure below,which of the following is true at a wage rate of $7?

A)The income effect dominates the substitution effect.
B)The substitution effect dominates the income effect.
C)The income effect exactly offsets the substitution effect.
D)No labor is supplied.
E)The individual will supply 30 hours of labor.

Question 48

Exhibit 12.2

Refer to Exhibit 12.2,which shows a backward-bending labor supply curve for an individual.In the figure below,which of the following is true at a wage rate of $20?

A)The income effect dominates the substitution effect.
B)The substitution effect dominates the income effect.
C)No labor is supplied.
D)The income effect equals the substitution effect.
E)The supply curve is horizontal.

Question 49

Exhibit 12.3

Refer to Exhibit 12.3,which shows a backward-bending labor supply curve for an individual.In the figure below,which of the following is true when the wage rate increases from $9 to $11?

A)The substitution effect will cancel out the income effect.
B)The income effect will cause the person to work more hours.
C)The substitution effect will cause the person to work fewer hours.
D)The income effect will cause the person to work the same number of hours.
E)The substitution effect will cause the person to work the same number of hours.

Question 50

The market labor supply curve is the _____

A)vertical sum of the individual labor supply curves.
B)horizontal sum of the individual labor supply curves.
C)vertical difference of the individual labor supply curves.
D)horizontal difference of the individual labor supply curves.
E)average of the individual labor supply curves.

Question 51

Which of the following statements is not true of labor supply?

A)Jerry's labor supply curve can bend backward if the income effect of a higher wage rate outweighs the substitution effect.
B)Bob's labor supply curve will not bend backward if the wage rate is never so high that the income effect outweighs the substitution effect.
C)If there is a wage rate above which the income effect is at least as great as the substitution effect, the labor supply curve will be vertical or bend backward.
D)The labor supply curve will slope upward if the income effect dominates the substitution effect.
E)Hayden's offer to work more hours as a result of a wage increase suggests that the substitution effect dominates the income effect.

Question 52

What was the highest average wage in 2016?

A)$56.74 an hour
B)$10.15 an hour
C)$25.30 an hour
D)$16.20 an hour
E)$11.47 an hour

Question 53

Exhibit 12.4

Refer to Exhibit 12.3,which shows a backward-bending labor supply curve for an individual.In the figure below,if the wage rate is $9,how many hours per week will this person work?

A)30 hours
B)36 hours
C)40 hours
D)45 hours
E)48 hours

Question 54

Exhibit 12.3

Refer to Exhibit 12.3,which shows a backward-bending labor supply curve for an individual.In the figure below,which of the following is true when the wage rate increases from $11 to $13?

A)The substitution effect will cause the person to work more hours.
B)The income effect will cause the person to work fewer hours.
C)The substitution effect will cause the person to work fewer hours.
D)The income effect will cause the person to work the same number of hours.
E)The substitution effect will cause the person to work the same number of hours.

Question 55

Other things equal,the supply of labor will be higher for a job that _____

A)is less prestigious.
B)offers fewer nonmonetary rewards.
C)provides little on-the-job training.
D)is more difficult to perform.
E)provides a climate-controlled work environment.

Question 56

Exhibit 12.4

Refer to Exhibit 12.4,which shows a backward-bending labor supply curve for an individual.In the figure below,how much will the employer have to pay per hour to get this worker to work 48 hours per week?

A)$6
B)$7
C)$9
D)$12
E)$10

Question 57

A person who wins a large sum of money in the state lottery is _____

A)likely to increase the amount of market work offered at each wage rate.
B)not likely to change the amount of work offered at each wage rate.
C)likely to decrease the amount of work offered at each wage rate.
D)likely to substitute market work for leisure time because of the substitution effect.
E)likely to substitute market work for leisure time because of the income effect.

Question 58

The market labor supply curve is _____

A)the sum of individual labor supply curves at each quantity of labor.
B)the sum of individual labor supply curves at each wage rate.
C)the average of all individual labor supply curves.
D)the sum of the upward-sloping portions of individual labor supply curves.
E)the sum of the downward-sloping portions of individual labor supply curves.

Question 59

The equilibrium wage _____

A)is the same in all labor markets.
B)occurs where the supply of labor curve begins to bend backward.
C)cannot be calculated because there are so many labor markets.
D)is determined by the market demand for labor and the market supply of labor.
E)is irrelevant because of unions.

Question 60

Which type of occupation earned the highest average wage in 2016?

A)management
B)legal
C)business and finance
D)sales
E)food preparation and serving

Question 61

Which of the following cannot contribute to differences in wage rates across labor markets?

A)differences in training and education requirements
B)discrimination in the job market
C)differences in risks involved in jobs
D)problems of labor mobility among various jobs
E)distribution of a newspaper with classifieds

Question 62

Exhibit 12.5

Refer to Exhibit 12.5,which shows age,education,and pay among workers.Which education level is represented by point C?

A)professional degree
B)bachelor's degree
C)high school diploma
D)no high school diploma
E)No education level is represented.

Question 63

Who is likely to earn a higher income,dentists or dental hygienists,and why?

A)dental hygienists, because their education is less expensive
B)dentists, because their education is less expensive
C)dental hygienists, because their education is more expensive
D)dentists, because their education is more expensive
E)neither, because they usually earn the same wage rate

Question 64

Which of the following creates the most difference in wages?

A)jobs that have a long commute
B)jobs that have no discrimination
C)jobs with a higher probability of injury or death
D)jobs with high mobility
E)jobs with high stimulation

Question 65

Exhibit 12.5

Refer to Exhibit 12.5,which shows age,education,and pay among workers.Which education level is represented by point D?

A)professional degree
B)bachelor's degree
C)high school diploma
D)no high school diploma
E)No education level is represented.

Question 66

Which of the following creates the most difference in wages?

A)jobs in different geographical locations
B)jobs that have no discrimination
C)jobs with a long commute
D)jobs with high mobility
E)jobs with high stimulation

Question 67

Among those without high school diplomas,workers in the 55-64 age group earned on average _____

A)26 percent more than those in the 35-44 age group.
B)26 percent less than those in the 35-44 age group.
C)26 percent more than those in the 25-34 age group.
D)26 percent less than those in the 25-34 age group.
E)the same as other age groups.

Question 68

Exhibit 12.5

Refer to Exhibit 12.5,which shows age,education,and pay among workers.The premium paid for years of experience also increases more for those with _____

A)more education.
B)less education.
C)no education.
D)blue-collar experience.
E)white-collar experience.

Question 69

Exhibit 12.5

Refer to Exhibit 12.5,which shows age,education,and pay among workers.Which education level is represented by point A?

A)professional degree.
B)bachelor's degree.
C)high school diploma.
D)no high school diploma.
E)No education level is represented.

Question 70

Exhibit 12.5

Refer to Exhibit 12.5,which shows age,education,and pay among workers.Which education level is represented by point B?

A)professional degree
B)bachelor's degree
C)high school diploma
D)no high school diploma
E)No education level is represented.

Question 71

Among those with professional degrees,workers in the 45-54 age group earned on average _____

A)73 percent more than those in the 35-44 age group.
B)73 percent less than those in the 35-44 age group.
C)73 percent more than those in the 25-34 age group.
D)73 percent less than those in the 25-34 age group.
E)the same as other age groups.

Question 72

Which of the following explains an increase in the demand for labor?

A)additional training that increases the productivity of each unit of labor in a market
B)an increase in the amount of risk associated with a job
C)a decrease in the amount of risk associated with a job
D)an improvement in the working conditions associated with a job
E)a decline in the working conditions associated with a job

Question 73

Which type of occupation earned the lowest average wage in 2016?

A)management
B)legal
C)business and finance
D)sales
E)food preparation and serving

Question 74

Exhibit 12.5

Refer to Exhibit 12.5,which shows age,education and pay among workers.For every age group,workers with more education _____

A)wear out faster with age.
B)are older.
C)are younger.
D)earn more.
E)earn less.

Question 75

Two accountants have the same amount of education and experience.If they work at the same type of job for the same profit-maximizing firm,which charges its clients a uniform hourly fee,then _____

A)they should both earn the same amount of money.
B)the one whose job is less risky should be paid more.
C)the one whose job is riskier should be paid less.
D)the one who has a higher marginal product should be paid more.
E)the one who has a higher marginal product should be paid less.

Question 76

An increase in the cost of training to acquire a skill,which must be paid by the worker,will _____

A)increase both the supply of and demand for labor in that market.
B)decrease both the supply of and demand for labor in that market.
C)increase the supply of labor and decrease the demand for labor in that market.
D)decrease the supply of labor and increase the demand for labor in that market.
E)decrease the supply of labor only in that market.

Question 77

Other things equal,the supply of labor will be lower for a job that _____

A)is prestigious.
B)offers valuable on-the-job training.
C)requires advanced skills or education.
D)provides a climate-controlled work environment.
E)allows for flexible work schedules.

Question 78

What was the lowest average wage in 2016?

A)$56.74 an hour
B)$10.15 an hour
C)$25.30 an hour
D)$16.20 an hour
E)$11.47 an hour

Question 79

What do wage differences across labor markets trace to?

A)differences in minimum wages
B)differences in the use of technology
C)differences in available resources
D)differences in union wages
E)differences in labor demand and in labor supply

Question 80

Two accountants have the same level of education.If they work at the same type of job for the same profit-maximizing firm,which charges its clients a uniform hourly fee,then ____

A)they should both earn the same amount of money.
B)the one whose job is less risky will be paid more.
C)the one whose job is riskier will be paid less.
D)the one who has experience will be paid more.
E)the one who has less experience will be paid more.