Question 1

The typical labour supply curve is upward sloping, but it is possible for the curve to be backward bending-negatively sloped-at very high wage levels.Which of the following would cause a backward-bending supply curve?

Accepted Answer

A) This would occur when the income effect from an increase in the wage becomes larger than the substitution effect. 
B) This would occur when the substitution effect from an increase in the wage becomes larger than the income effect. 
C) This would occur if leisure were an inferior good. 
D) This would occur when a large number of workers choose leisure rather than employment at low wages; only a very large increase in the wage will lead these workers to prefer employment to leisure.

Question 2

Some superstar athletes in the sports industry earn very high levels of income relative to other occupations, and over time the wage differential has been increasing.What could have caused this?

Accepted Answer

A) The supply of star athletes has decreased. 
B) The supply of star athletes has increased due to university athletic programs. 
C) Technological advances such as cable television has increased the demand for sports entertainment. 
D) The market power of athletes' unions has increased.

Question 3

A firm's demand curve for labour slopes downwards because

Accepted Answer

A) of the law of diminishing marginal returns. 
B) firms supply less labour as the wage rate rises. 
C) workers supply less labour services as the wage rate falls. 
D) of rising marginal product.

Question 4

Suppose the labour market is in equilibrium.Which of the following statements is false?

Accepted Answer

A) The equilibrium wage rate is equal to the marginal revenue product of labour. 
B) At the equilibrium wage, the quantity of labour demanded equals the quantity of labour supplied. 
C) Some workers will earn more than the equilibrium wage. 
D) At the equilibrium wage, the demand for labour is equal to the supply of labour.

Question 5

An example of a compensating wage differential is

Accepted Answer

A) Nurse anaesthetists are paid less than anaesthesiologists (who have medical degrees). 
B) Workers in a dynamite mine receive higher wages than if they worked in other jobs that require the same level of skills. 
C) In the market for lawyers, top graduates from the top programs earn starting salaries that are significantly higher than the starting salaries earned by lower-ranked graduates from the lower-ranked programs. 
D) Popular movie stars like George Clooney command much higher salaries than other talented but lesser-known actors.

Question 6

What is the difference between 'straight-time pay,' 'commission pay,' and 'piece-rate pay'?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The answer of What is the difference between 'straight-time pay,'...

Question 7

Table 12.5 
-Refer to Table 12.5.Dante owns a pencil factory and faces the situation shown in the table, and the cost of renting a machine is $240 per week.
a.Fill in the blanks in the table and determine the profit-maximising number of machines for Dante to rent.Explain why renting this number of machines is profit maximising.
b.Draw Dante's demand curve for capital.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The answer of Table 12.5 
-Refer to Table 12.5.Dante owns...

Question 8

A firm might prefer a commission system of compensation when the nature of the work is repetitive and monotonous and can be performed by an individual.

Accepted Answer

A) True 
 B)False

Question 9

The substitution effect of a wage decrease examines the effect of the decrease in wage income on a worker's ability to consume goods and services.

Accepted Answer

A) True 
 B)False

Question 10

If a firm is the sole employer of a factor of production, it is known as

Accepted Answer

A) a monopoly. 
B) a competitor. 
C) a monopsony. 
D) an economically discriminating firm.

Question 11

A profit-maximising firm should hire workers up to the point where labour's marginal revenue product equals the wage rate.

Accepted Answer

A) True 
 B)False

Question 12

That some talented people may not enter an occupation because they have heard that people with their personal characteristics do not get hired in that occupation is known as

Accepted Answer

A) economic discrimination. 
B) a compensating difference. 
C) a negative feedback loop. 
D) worker discrimination.

Question 13

Suppose the following two events occur in the domestic market for radiologists: 
a.Some hospitals are outsourcing some radiology services such as reading x-rays.
b.Some medical schools have closed down their radiology departments as fewer students enrol in this field.
What is likely to happen to the equilibrium wage and quantity of radiologists following these two events?

Accepted Answer

A) The equilibrium wage and the equilibrium quantity of radiologists rise. 
B) The equilibrium wage and the equilibrium quantity of radiologists fall. 
C) The equilibrium quantity falls and the effect on the equilibrium wage of radiologists is indeterminate. 
D) The equilibrium wage falls and the effect on equilibrium quantity of radiologists is indeterminate.

Question 14

Table 12.2 
-Refer to Table 12.2.What is the marginal revenue product of labour from the third unit of labour?

Accepted Answer

A) $5460. 
B) $1560. 
C) $1260. 
D) $780.

Question 15

Firms use information on labour's marginal revenue product to determine

Accepted Answer

A) how much to produce at each output price. 
B) how many workers to hire at each wage rate. 
C) how much marginal product to produce at each wage rate. 
D) how much labour services to supply at each wage rate.

Question 16

Let MP = marginal product, P = output price, and W = wage, then the equation that represents a situation where a competitive firm should lay off some workers to maximise profits is

Accepted Answer

A) P × MP = W. 
B) P × MP > W. 
C) P × MP < W. 
D) MP × W = P.

Question 17

If you own a $1000 face value bond with one year remaining to maturity and a 3 per cent interest rate, and new bonds are paying 14 per cent, what is the most you can get for your old bond?

Accepted Answer

A) $903.51 
B) $997.19 
C) $1000 
D) $1140

Question 18

The most important factor contributing to wage differences in the labour market is differences in the level of education and training among workers.

Accepted Answer

A) True 
 B)False

Question 19

Economic rent is defined as

Accepted Answer

A) what you pay to rent your apartment or house. 
B) the revenue received by a factor of production with an upward sloping supply curve. 
C) the price of a factor of production that is fixed in supply. 
D) the surplus received by employing a factor of production in its highest valued use.

Question 20

The labour market is considered as one of the more important markets in an economy because

Accepted Answer

A) most people typically earn the bulk of their income from wages and salaries. 
B) most people are concerned that wages determined in the labour market are unfair. 
C) the usual market forces do not hold in the labour market. 
D) the labour market does not reach an equilibrium.

Exam 12: The Markets for Labour and Other Factors of Production

The typical labour supply curve is upward sloping, but it is possible for the curve to be backward bending-negatively sloped-at very high wage levels.Which of the following would cause a backward-bending supply curve?

Some superstar athletes in the sports industry earn very high levels of income relative to other occupations, and over time the wage differential has been increasing.What could have caused this?

A firm's demand curve for labour slopes downwards because

Suppose the labour market is in equilibrium.Which of the following statements is false?

An example of a compensating wage differential is

What is the difference between 'straight-time pay,' 'commission pay,' and 'piece-rate pay'? __________________________________________________________________________________________________________________________________________________________________________________________

A firm might prefer a commission system of compensation when the nature of the work is repetitive and monotonous and can be performed by an individual.

The substitution effect of a wage decrease examines the effect of the decrease in wage income on a worker's ability to consume goods and services.

If a firm is the sole employer of a factor of production, it is known as

A profit-maximising firm should hire workers up to the point where labour's marginal revenue product equals the wage rate.

That some talented people may not enter an occupation because they have heard that people with their personal characteristics do not get hired in that occupation is known as

Table 12.2 -Refer to Table 12.2.What is the marginal revenue product of labour from the third unit of labour?

Firms use information on labour's marginal revenue product to determine

Let MP = marginal product, P = output price, and W = wage, then the equation that represents a situation where a competitive firm should lay off some workers to maximise profits is

If you own a $1000 face value bond with one year remaining to maturity and a 3 per cent interest rate, and new bonds are paying 14 per cent, what is the most you can get for your old bond?

The most important factor contributing to wage differences in the labour market is differences in the level of education and training among workers.

Economic rent is defined as

The labour market is considered as one of the more important markets in an economy because