Deck 12: Labor Markets and Labor Unions

Question 1

Leisure time is not subject to diminishing marginal utility.​

Answer 1

False

Question 2

An increase in labor supply will increase the equilibrium wage rate.​

Answer 2

False

Question 3

​The unions of plumbers and carpenters are examples of industrial unions.

Answer 3

False

Question 4

The demand for labor curve bends backward whenever the income and substitution effects work in opposite directions.​

Question 5

The figure given below shows a backward-bending labor supply curve for an individual. In the figure below, when the wage rate increases from $9 to $12, the substitution effect outweighs the income effect.
​
Figure 12.5
​

Question 6

A consumer maximizes utility by allocating time so that the expected marginal utilities of the last unit of time spent in each activity are identical.​

Question 7

As the wage rate increases, the income effect tends to reduce the quantity of labor supplied to the market.​

Question 8

The figure given below shows a backward-bending labor supply curve for an individual. In the figure below, when the wage rate rises above $12, the substitution effect outweighs the income effect.
​
Figure 12.5
​
​

Question 9

Most labor negotiations in the United States end without a strike.​

Question 10

Jason can maximize his satisfaction by allocating time among market work, nonmarket work, and leisure so that the final marginal utilities per hour spent in each activity are identical.​

Question 11

Every individual has a labor supply curve in each market where there is a possible use for his or her labor.​

Question 12

An increase in the wage rate will decrease the demand for labor.​

Question 13

As the wage rate increases, the substitution effect causes workers to supply more time to market work and the income effect causes them to supply less time to market work.​

Question 14

A worker's labor supply depends on, among other things, his ability, his preference for the task, and the opportunity cost of his time.​

Question 15

If a person's labor supply curve is positively sloped, the income effect outweighs the substitution effect.​

Question 16

A labor union is a group of business owners who join together to improve working conditions.​

Question 17

The amount of time an individual is willing to sell on the labor market varies positively with the value of leisure time.​

Question 18

The individual supply curve of labor is backward bending because the substitution effect offsets the income effect at higher wage rates.​

Question 19

​If the substitution effect dominates the income effect, then an increase in the wage rate will increase the quantity of labor supplied by an individual.

Question 20

If Dian chooses a job with a lower income over one with a higher income, she cannot be maximizing utility.​

Question 21

If a union raises initiation fees significantly and if employers in the industry hire only union workers, the supply of union labor curve will shift to the left.​

Question 22

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 either unwilling or unable to perform the job
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 23

In order for a strike to be successful, the union must decrease the supply of both union and nonunion labor.​

Question 24

​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 25

Featherbedding refers to union efforts to force employers to hire more workers than demanded at a particular wage.​

Question 26

Unions can affect the demand for, but not the supply of, labor.​

Question 27

​Leisure includes activities such as:

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

Question 28

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 29

​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.

Question 30

If a union negotiates a wage greater than the competitive wage, the total union wage bill will necessarily decrease.​

Question 31

If a professional association restricts membership and firms cannot employ non-association workers, the equilibrium wage will increase.​

Question 32

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 33

Collective bargaining is the process by which a labor union and a firm negotiate an employment contract.​

Question 34

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 35

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.

Question 36

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 37

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 38

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 equal to or greater than the minimum wage.
C)whenever you derive utility from the consumption made possible through work.
D)unless time spent working is a source of disutility.
E)only when marginal utility is negative for an additional unit of leisure.

Question 39

Market work includes activities such as:​

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

Question 40

If an industrial union is able to negotiate a wage above the competitive market-clearing wage, employment in the industry will increase.​

Question 41

​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 42

​People make mistakes in allocating their time:

A)only when leisure time is an inferior good.
B)because the future is uncertain.
C)more often when the cost of making a mistake is high.
D)only when economists remove the assumption that individuals are rational.
E)because information is free and readily available.

Question 43

​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 44

​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 45

​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 46

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

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

Question 47

​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 time

Question 48

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

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

Question 49

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 50

People who earn higher market wages, other things constant, will:​

A)provide more labor to nonmarket work.
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)provide more labor to nonmarket work even if the market can provide the services more cheaply.
E)provide less labor to market work and more labor to nonmarket work.

Question 51

​People who earn higher market wages:

A)have a greater net utility associated with nonmarket work.
B)supply more hours to market work than people with lower wages.
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 52

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 53

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

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

Question 54

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 55

​The substitution effect in the labor supply decision 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 56

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

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

Question 57

​At a low wage rate, _____.

A)usually there is no substitution effect
B)usually there is 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 58

​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 59

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

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

Question 60

​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 61

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 62

The figure given below 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? ​
Figure 12.4
​
​

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

Question 63

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 do 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 64

The figure given below 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? ​
Figure 12.2
​

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 65

The figure given below 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? ​
Figure 12.3
​​
​

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 66

​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 due to the substitution effect.
E)likely to substitute market work for leisure time due to the income effect.

Question 67

The average work week 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 slopping.

Question 68

The figure given below 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? ​
Exhibit 12.2
​

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 69

The figure given below 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? ​
Figure 12.2
​

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 70

​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 71

​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 decision.
D)increase his or her supply of labor.
E)decrease his or her supply of labor.

Question 72

The figure given below 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? ​
Figure 12.3
​
​

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 73

The figure given below 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? ​
Figure 12.1
​
​

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 74

​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 75

The figure given below 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? ​
Figure 12.3
​
​

A)The substitution effect will cause the person to work more hours.
B)The income effect will cause the person to work less 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 76

The figure given below 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? ​
Figure 12.1
​
​

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 77

The figure given below 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? ​
Figure 12.4
​

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

Question 78

The figure given below 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? ​
Figure 12.1
​
​

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 79

​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 80

​A large inheritance from a relative will tend to:

A)cause movement up and to the right along the individual's labor supply curve.
B)cause movement up 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.