Deck 13: Labor Markets

Question 1

Real wages are actual wages less taxes.

Answer 1

False

Question 2

The wage is the

A)term used for the price of labor.
B)amount of total earnings from all income sources over a period of time.
C)amount of money paid directly to a worker for hours worked.
D)amount of labor worked for a specific amount of money.
E)amount of money that a worker loses from gambling.

Answer 2

term used for the price of labor.

Question 3

The measure of workers' pay is affected by the interval of time over which workers are paid.

Answer 3

True

Question 4

Labor is

A)exchanged in markets much like any other good or service.
B)another term for "union."
C)the physical effort of humans.
D)bought and sold with little regulation.
E)not something to which economists should apply reasoning.

Question 5

The nominal wage

A)does not account for inflation.
B)reflects actual buying power.
C)is expressed in dollars,whereas the real wage is not.
D)is the amount of money one actually receives after taxes.
E)measures productivity.

Question 6

Wages are returns to individuals owning a firm.

Question 7

If the nominal wage is $25 per hour and the consumer price index (CPI)is 1.75,then the real wage is

A)$14.29.
B)$23.25.
C)$26.75.
D)$43.75.
E)$25.00.

Question 8

The growth rate of real wages has ____ in recent years.

A)doubled
B)fallen
C)stayed the same
D)risen
E)been negative

Question 9

Suppose that over the course of a year,one's wage increases from $15 per hour to $16.50 per hour.If the inflation rate for the year is 12 percent,then the

A)real wage has increased by 22 percent.
B)nominal wage has increased by 2 percent.
C)real wage has increased by 2 percent.
D)real wage has fallen by 2 percent.
E)nominal wage has increased by 15 percent.

Question 10

Compensation

A)is the term used for time off earned by working extra hours.
B)is the pay workers receive for being injured on the job.
C)refers to lawsuit settlements.
D)is synonymous with the term wage in the text.
E)excludes fringe benefits.

Question 11

The real wage is

A)the manner in which productivity is measured.
B)always less than the nominal wage.
C)the amount of money one actually receives after taxes.
D)the wage people are paid adjusted for interest rates.
E)the wage people are paid adjusted for inflation.

Question 12

Over the past 30 years,real wages have

A)never fallen.
B)not changed at all.
C)generally increased.
D)generally stayed the same.
E)generally fallen.

Question 13

The basic tools of supply and demand analysis can be used to explain wage differences between skilled and unskilled workers.

Question 14

Which of the following statements is true?

A)Fringe benefits are not part of a person's total earnings.
B)Fringe benefits do not affect a person's decision whether to accept a job.
C)Compensation and fringe benefits are unrelated concepts.
D)Fringe benefits are taxed just like regular money pay.
E)Fringe benefits have grown as a percentage of workers' total pay.

Question 15

The reason that economists are concerned with looking at the real wage is that

A)the real wage shows absolute buying power and allows economists to compare U.S.pay to that of other countries.
B)because of inflation,the nominal wage often understates the actual rise in purchasing power.
C)the real wage simplifies the gathering of statistics.
D)standard of living and pay really are determined by purchasing power,not number of dollars.
E)the real wage shows that pay actually has been falling for a long time.

Question 16

Supply and demand analysis

A)has been thoroughly discredited as a basis for analyzing labor.
B)explains all labor market phenomena.
C)is one of the tools economists use to investigate labor markets.
D)is used only in relation to commodities,not in relation to services such as labor.
E)is the only tool used to explain all labor market issues.

Question 17

In the United States,because the amount of part-time work has increased and the average number of hours worked per week has increased,

A)average annual earnings have increased less rapidly than average weekly or hourly earnings.
B)average annual earnings have increased more rapidly than average weekly or hourly earnings.
C)average weekly earnings have increased at the same rate as average hourly earnings.
D)average weekly earnings have increased more rapidly than average hourly earnings.
E)average weekly earnings have increased less rapidly than average hourly earnings.

Question 18

Fringe benefits

A)are an entitlement of workers.
B)are not earned.
C)can be a large part of one's total pay.
D)do not include cash bonuses.
E)are received only by executives.

Question 19

Discrimination in the labor market cannot be addressed by the standard tools of supply and demand.

Question 20

In determining workers' pay,which of the following factors is not an important consideration?

A)Exactly what constitutes the pay of a worker
B)The effects of inflation
C)Every factor listed is important in determining worker pay.
D)Time spent working
E)The interval of time between compensation days

Question 21

Because labor demand is a derived demand,the labor demand curve is upward-sloping.

Question 22

The average real wage gap between those with college educations and those with only high-school educations has been growing.

Question 23

Explain why government tax policy might lead companies to rely more heavily on fringe benefits as a payment scheme.

Question 24

A major reason for the recent trend of wage dispersion in the United States is

A)the widening gap between the wages of more educated workers and the wages of those with less education.
B)the widening gap between the wages of women and those of men.
C)the increase in firm profits.
D)the increase in the amount of government regulations.
E)higher inflation.

Question 25

Suppose that in one year the nominal wage rises from $12 to $16 and the price index changes from 0.75 to 1.Which grew faster,the nominal wage or the real wage?

Question 26

Which of the following statements is true?

A)Firms ultimately demand labor in order to make profits.
B)Firms demand labor for the tax deduction.
C)Labor supply shows how the quantity of labor changes with changes in working conditions.
D)People supply labor for the enjoyment of it.
E)As everyone must supply labor by necessity,labor demand is all that really counts in the labor market.

Question 27

The demand curve for the labor market can be derived from the demand for goods and services.

Question 28

Labor markets are different from other markets in the sense that the

A)supply for labor is a derived supply.
B)demand for labor is a derived demand.
C)demand for labor depends on the supply of labor.
D)demand for labor does not depend on anything.
E)labor market is never in equilibrium.

Question 29

Fringe benefits are a growing proportion of worker pay in the United States.

Question 30

Which of the following is true of a labor market?

A)Firms supply labor and workers demand labor.
B)Both firms and workers demand labor.
C)Both firms and workers supply labor.
D)Firms demand labor and workers supply labor.
E)Neither firms nor workers demand labor.

Question 31

Which of the following is true of a standard supply and demand diagram for the labor market?

A)Price is displayed on the vertical axis and labor quantity is displayed on the horizontal axis.
B)Price is displayed on the horizontal axis and labor quantity is displayed on the vertical axis.
C)Wage is displayed on the vertical axis and labor quantity is displayed on the horizontal axis.
D)Wage is displayed on the horizontal axis and labor quantity is displayed on the vertical axis.
E)Price is displayed on the vertical axis and wage is displayed on the horizontal axis.

Question 32

Suppose an individual is paid $10 per hour for 10 years,and for the first year the price index is 1.By the tenth year the price index is 3.By how much did the real wage change over the past 10 years?

Question 33

Since the mid-1970s,real wages in the United States have been declining.

Question 34

Total compensation is properly calculated by taking total pay and subtracting fringe benefits.

Question 35

Which of the following is true of the supply and demand curves for the labor market?

A)The supply curve slopes downward and the demand curve slopes upward.
B)The supply curve slopes upward and the demand curve slopes downward.
C)Both the supply curve and the demand curve slope upward.
D)Both the supply curve and the demand curve slope downward.
E)Both the supply curve and the demand curve are horizontal.

Question 36

Which of the following statements is true?

A)The gap between the wages of college-educated workers and the wages of workers with only high-school educations has been narrowing over the past 25 years.
B)Since the 1980s,the average pay for women has risen as a percentage of the average pay for men.
C)Until the 1980s,women's income as a percentage of men's had never been above 60 percent.
D)Due to affirmative action rules,women now generally make more than men.
E)The gap between the average pay of women and that of men has not changed much over the past 30 years.

Question 37

Calculate the real wage when the nominal wage at a given time is $35 and the price index is 0.4.

Question 38

How is demand in the labor market related to the demand for goods and services?

Question 39

Weekly earnings for the average worker have increased at the same rate as hourly earnings.

Question 40

Wage dispersion refers to

A)the way people spend their wages.
B)how wage levels are distributed among different groups of people.
C)how wage levels are distributed geographically.
D)how corporate earnings are dispersed among stockholders.
E)the amount of wages lost due to relocation activities.

Question 41

For a competitive firm to maximize profits,it must hire labor up to the point at which marginal revenue product is equal to the wage rate.

Question 42

Suppose a competitive firm that is profit-maximizing pays a wage of $750 per week,and the price of its output is $15 per unit.Based on this information,one may surmise that the firm's marginal revenue product is

A)50 units.
B)$15.
C)$50.
D)$750.
E)15 units.

Question 43

In order to calculate marginal revenue product for a competitive firm,one may multiply marginal product by output price.

Question 44

As more labor is hired,the marginal revenue product of a competitive firm

A)increases because total revenue increases.
B)declines because marginal product of labor declines.
C)does not change because marginal revenue is constant.
D)declines because output price declines.
E)declines because marginal revenue declines.

Question 45

The contribution of one more unit of labor to total revenues is called

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

Question 46

Derived demand is demand that is derived from consumer tastes,preferences,and incomes.

Question 47

Exhibit 13-1
Refer to Exhibit 13-1.If output price is $12 and the weekly wage is $300,the marginal revenue product of the fourth worker is

A)$12.
B)$75.
C)$192.
D)$18.75.
E)$300.

Question 48

Exhibit 13-1
Refer to Exhibit 13-1.Suppose the firm is competitive and the output price is $10.Also suppose the prevailing wage is $200 per week.The firm will be able to hire ____ workers.

A)5
B)3
C)2
D)4
E)6

Question 49

The demand for automobile workers is positively related to the supply of automobiles.

Question 50

The demand for labor is derived from the

A)productivity of labor.
B)supply of the product it produces.
C)demand for the product it produces.
D)supply of labor.
E)demand for the product it produces and the productivity of labor.

Question 51

Economists assume that firms decide whether to hire another unit of labor based only on

A)how much the labor will produce.
B)the cost of the labor.
C)how much the labor's output is worth.
D)how profits will be affected.
E)the labor's productivity.

Question 52

For a competitive firm,marginal revenue product of labor is the market value of the output that results from adding one more unit of labor to the production line.

Question 53

The typical shape of the marginal revenue product curve for labor is

A)upward-sloping.
B)downward-sloping.
C)horizontal.
D)vertical.
E)U-shaped.

Question 54

Suppose a competitive firm that is profit-maximizing pays a wage of $750 per week,and the price of its output is $15 per unit.Based on this information,one may surmise that the firm's marginal product is

A)$750.
B)15 units.
C)$50.
D)50 units.
E)$15.

Question 55

Exhibit 13-2
Refer to Exhibit 13-2.The MRP curve for labor for the competitive firm is negatively sloped because

A)the firm can sell more units only at lower prices.
B)of all the reasons listed here.
C)the marginal product of labor curve is negatively sloped.
D)at lower prices,the demand for labor increases.
E)of increasing returns to labor.

Question 56

The marginal revenue product of labor is

A)how much a firm's total costs change as a result of hiring one more unit of labor.
B)how much a firm's total profits change as a result of hiring one more unit of labor.
C)the same as marginal product.
D)how much a firm's total profits change as a result of producing one more unit of output.
E)how much a firm's total revenues change as a result of hiring one more unit of labor.

Question 57

Marginal revenue product can be calculated for a competitive firm by

A)dividing marginal revenue by output price.
B)multiplying marginal revenue by output price.
C)multiplying marginal cost by output price.
D)adding marginal product and output price.
E)multiplying marginal product by output price.

Question 58

Suppose there is an increase in the demand for computers in a competitive market.Then,in computer production,

A)the marginal product will not change but the marginal revenue product will decrease.
B)the marginal product will not change but the marginal revenue product will increase.
C)both the marginal product and the marginal revenue product will increase.
D)both the marginal product and the marginal revenue product will decrease.
E)both the marginal product and the marginal revenue product will not change.

Question 59

Exhibit 13-1
Refer to Exhibit 13-1.Suppose the profit-maximizing,competitive firm hires five workers and the output price is $15.Then the wage per week must be

A)less than $180.
B)less than or equal to $180 but greater than $135.
C)$135 or less.
D)exactly $180.
E)greater than $180.

Question 60

The difference between marginal revenue product and marginal product is that

A)one is measurable whereas the other is not.
B)one looks at change in costs whereas the other looks at change in revenue.
C)one looks at change in costs whereas the other looks at change in output.
D)one looks at change in revenue whereas the other looks at change in output.
E)one is a real variable whereas the other is a nominal variable.

Question 61

Exhibit 13-2
Refer to Exhibit 13-2.If the marginal revenue product (MRP)of one additional worker is $2 and the wage of that worker is $4,then

A)the firm is earning a profit from the additional worker equal to $2.
B)the sixth worker should be laid off.
C)more workers should be employed because the firm is earning a profit from the last worker employed.
D)the sixth worker should be employed,but no more workers should be employed.
E)more workers should be employed.

Question 62

When a firm has market power,the marginal revenue product is less than the market value of the extra output produced by one more unit of labor.

Question 63

Exhibit 13-3

-Refer to Exhibit 13-3.Calculate the total revenue resulting from the output of five workers.Output price is $35 and wage is $200 per week.

Question 64

Exhibit 13-2
Refer to Exhibit 13-2.If the wage per day is $55 and the firm is employing 6 units of labor,

A)it is uncertain what the firm should do given the information available.
B)the firm should increase its hiring of labor.
C)the firm should decrease the amount of labor it hires.
D)the firm is profit-maximizing.
E)the firm is earning negative profits.

Question 65

If marginal revenue product is greater than the wage,a firm should hire less input.

Question 66

An increase in a firm's product price causes

A)an increase in the quantity of labor demanded by the firm.
B)a decrease in the quantity of labor demanded by the firm.
C)an increase in the demand for labor by the firm.
D)a decrease in the demand for labor by the firm
E)no change in the demand for labor by the firm.

Question 67

A firm with market power in the output market

A)does not have a derived demand.
B)adjusts labor to equate the wage and marginal revenue product.
C)can set whatever wage it wishes to pay.
D)finds it unnecessary to maximize profit.
E)adjusts labor so that the wage is lower than the marginal revenue product.

Question 68

A firm with market power in the output market adjusts labor to equate the wage with

A)MR $\times$ MC.
B)P $\times$ MP.
C)MR $\times$ MP.
D)P $\times$ MR.
E)P $\times$ MC.

Question 69

The marginal revenue product of labor curve is an individual firm's labor demand curve.

Question 70

Exhibit 13-2
Refer to Exhibit 13-2.If the wage rate is $60,the firm with the MRP should hire ____ units of labor.

A)4
B)3
C)5
D)7
E)6

Question 71

An increase in a firm's marginal revenue causes a(n)

A)increase in the quantity of labor demanded by the firm.
B)increase in the demand for labor by the firm.
C)decrease in the demand for labor by the firm.
D)decrease in the quantity of labor demanded by the firm.
E)increase in the supply of labor.

Question 72

A competitive firm's derived demand curve is its

A)wage curve.
B)marginal product curve.
C)marginal revenue product curve.
D)output demand curve divided by the wage.
E)output demand curve.

Question 73

If marginal revenue product is $8 per hour,the wage is $15 per hour,and the output price is $10,calculate the marginal product.

Question 74

The market demand for labor is obtained by

A)multiplying the quantity of labor demanded by a single firm at every wage rate by the number of firms minus 1.
B)summing the prices firms are willing to pay for each quantity of labor.
C)multiplying the quantities of labor demanded by each firm at each wage rate.
D)summing the quantities of labor demanded by each firm at each wage rate.
E)dividing the quantities of labor demanded by each firm at each wage rate.

Question 75

The market demand for labor relates the quantity of labor demand to price of goods and services that consumers pay.

Question 76

How can one reconcile the rule that states "Hire labor until MRP = W" with the rule that states "Produce output such that MC=P"?

Question 77

The market demand for labor is the sum of the quantity demanded of labor at all firms at every wage

Question 78

For a profit-maximizing competitive firm,its marginal revenue product curve is its labor demand curve.

Question 79

Explain why a firm's derived demand for labor curve is its marginal revenue product curve.

Question 80

Exhibit 13-3

-Refer to Exhibit 13-3.Suppose the weekly wage is $500 and the output price is $40 per unit.Calculate the marginal revenue product of the fourth worker.(Hint: Assume this is a competitive firm.)