Question 1

Explain graphically that a payroll tax imposed by the government either on the employers or on the employees will have a similar impact.

Accepted Answer

In the figure given below,the supply and demand curves for labor are S and D respectively.The wage rate is $10 per hour and employment is L₁.Now suppose the government levies a payroll tax on employers,which requires them to pay $2.00 to the government for each hour of labor they employ. With the tax in place,employers will still pay no more than $10.00 per hour for the quantity L₁,but since they must pay $2.00 to the government,the amount that employers will be willing to pay for L₁ units of labor falls to $8.00 per hour.In the diagram,the effect of the tax is thus shown as a vertical shift downward by $2.00 in the demand curve to D'.The downward shift in the demand curve means that with a $2.00-per-hour tax,employers pay $2.00 less to workers at each level of employment.With the supply curve S,the tax reduces employment to L₂,and the wage rate paid to workers falls to w_A,or $8.50.To employers,the cost of labor including the tax is now $10.50 per hour. Alternatively,if employees pay the $2.00-per-hour tax entirely,the supply curve shifts vertically upward by $2.00,or to S_,without affecting the demand curve.The shift in supply reflects the fact that workers must receive $2.00 more per hour to yield the necessary after-tax wage to compensate them for supplying each alternative quantity of labor.Thus,the real effects of the tax are exactly the same whether the tax is collected from employers or employees.

Question 2

The federal minimum wage is:

Accepted Answer

A)  not likely an efficiency wage because it does not attract high quality workers.
B)  likely an efficiency wage because it prevents firms from hiring unskilled workers and lowers it total cost of production.
C)  likely an efficiency wage because it lowers the costs of searching for new workers.
D)  not likely an efficiency wage because firms would attempt to earn higher profits without any government intervention. D

Question 3

The National Collegiate Athletic Association [NCAA] has been able to control cheating by:

Accepted Answer

A)  reducing the number of athletic scholarships a school caught cheating can grant.
B)  taking away the accreditation of schools caught cheating.
C)  not permitting coaches,who were caught cheating once,to coach any more.
D)  setting an official wage for the athletes that is below the market-clearing wage. A

Question 4

Suppose in the absence of a tax a firm employs 50 skilled workers at a wage rate of $20 per labor hour.If the supply of labor is perfectly inelastic,what will be the impact of a $2.50 per hour tax on the net wage received by the workers and total employment?

Accepted Answer

A)  The net wage received by workers will be $17.50 per labor hour but total employment will not change.
B)  The net wage received by workers will be $15 per labor hour and total employment will reduce to 25 workers.
C)  The net wage received by workers will be $1750 per labor hour and total employment will reduce to 45 workers.
D)  The net wage received by workers will be $15 per labor hour and total employment will increase to 75 workers.

Question 5

Use the following figure to answer the question : Figure 18-3 : 
shows the impact of immigration on the labor market of a country.Immigration in shifts the labor supply curve from S to S'. 
-Refer to Figure 18-3.The increase in the income of the capital owners in the country,due to immigration,is represented by the area:

Accepted Answer

A)  ABC.
B)  wACw'.
C)  ABCE.
D)  wABw'.

Question 6

Consider two groups of workers both facing identical downward-sloping demand curves.The labor supply curve of group A workers is relatively elastic,while that of group B workers is relatively inelastic.Which of the following will result if the government imposes a minimum wage in both these labor market?

Accepted Answer

A)  Group A workers will experience a higher disemployment effect than group B workers.
B)  Group B workers will experience a higher disemployment effect than group A workers.
C)  The total unemployment experienced by Group A workers will be higher than Group B workers.
D)  The total unemployment experienced by Group B workers will be higher than Group A workers.

Question 7

Which of the following will result from a social security tax if the labor supply curve is vertical,but the labor demand curve is downward-sloping?

Accepted Answer

A)  Lower after-tax wages
B)  Unchanged levels of employment
C)  Higher labor costs to firms
D)  A fall in output prices

Question 8

Consider an industry that was initially employing both male and female workers.If some of the firms in this industry decide to discriminate against the male workers,what would be the most immediate impact on the labor market?

Accepted Answer

A)  The wage paid to the male workers will decline.
B)  The demand curve for labor will shift upward.
C)  The supply curve of labor will shift upward.
D)  The wage paid to the female workers will rise.

Question 9

Use the following figure to answer the question : Figure 18-1 : 
shows the demand and supply of unskilled labor that determines the equilibrium wage rate in the labor market.The minimum wage rate at $5.15 is higher than the equilibrium wage rate at $4. 
-Refer to Figure 18-1.Which of the following distances represents the complete unemployment created by the minimum wage legislation?

Accepted Answer

A)  OL3
B)  L2L3
C)  L2 L1
D)  OL2

Question 10

Which of the following is true for a competitive firm operating in an input market cartel?

Accepted Answer

A)  The individual firm's demand curve for the input is downward sloping when it acts alone.
B)  The individual firm's supply curve is horizontal when it acts alone and upward sloping with coordinated hiring.
C)  The individual firm's supply curve is upward sloping when the firm acts alone but horizontal otherwise.
D)  The individual firm's supply curve is horizontal when it acts alone and downward sloping with coordinated hiring.

Question 11

Minimum wage laws are promoted as the means of increasing the standard of living of the working poor.Which of the following is the most likely adverse consequence of minimum wage laws that makes the working poor worse off?

Accepted Answer

A)  The least skilled workers are priced out of the labor market.
B)  Firms respond by increasing other forms of non-wage compensation such as training and holiday pay.
C)  The average price level declines,increasing the spending power of the people.
D)  The skilled workers end up receiving a below average wage rate.

Question 12

The disemployment effect of the minimum wage refers to the tendency of employers to:

Accepted Answer

A)  hire experienced workers at higher wages.
B)  hire fewer workers at higher wages.
C)  pay lower wages to skilled workers.
D)  hire more workers at a lower wage.

Question 13

The cost of the mandated minimum wage is most likely to be borne by the:

Accepted Answer

A)  high income taxpayers who must pay the taxes to finance the program.
B)  consumers who purchase the goods produced by unskilled workers.
C)  businesses whose profits will fall due to the higher wage rates.
D)  government which pays the difference between the equilibrium and the minimum wage.

Question 14

The National Collegiate Athletic Association [NCAA] is a private organization empowered to regulate various aspects of college athletics.If this organization is somehow unable to prohibit schools that violate its rules from participating in postseason tournaments,we can expect:

Accepted Answer

A)  less number of student athletes to receive scholarships.
B)  the student-athletes to be paid far more than they are worth to their colleges.
C)  the schools that abide by the rules to find their athletic programs more profitable.
D)  fewer violations of the NCAA rules to occur.

Question 15

According to the Fair Labor Standards Act,which of the following workers are not covered under the minimum wage law?

Accepted Answer

A)  Farm workers
B)  Retailers
C)  Skilled professionals
D)  Engineers

Question 16

A cartel agreement between input buyers would try to:

Accepted Answer

A)  make the supply curve of their product more elastic.
B)  shift their demand curve for labor to the right.
C)  replicate monopsony and reduce input prices.
D)  replicate monopoly and increase prices.

Question 17

Suppose the market wage of nurses is raised from $14 an hour to $18 an hour because of a comparable-worth program,which aims to equalize the wages earned by men and women for similar jobs.Which of the following would result from this policy?

Accepted Answer

A)  There would be a surplus of nurses only if the demand for nurses is inelastic.
B)  There would be a shortage of nurses.
C)  There would be a surplus of nurses.
D)  There would be a shortage of nurses only if the demand for nurses is inelastic.

Question 18

Mention some of the factors which hinder input buyer's cartel.

Accepted Answer

The answer of Mention some of the factors which hinder...

Question 19

Consider a labor market where the demand for labor is downward-sloping but the supply of labor is perfectly inelastic.Which of the following will hold true in this market when a minimum wage is imposed by the government?

Accepted Answer

A)  The disemployment effect will surpass the total unemployment caused by the minimum wage.
B)  The total unemployment will surpass the disemployment effect caused by the minimum wage.
C)  The minimum wage will not decrease the total labor employment.
D)  The disemployment effect will be equal to the total unemployment caused by the minimum wage.

Question 20

A change in the social security system which required employers to pay the full amount of the social security tax rather than the 50 percent they now pay would:

Accepted Answer

A)  force the employers to bear the entire tax burden.
B)  reduce the burden of the tax on the employees but not eliminate the burden completely.
C)  have no effect on the portion of the tax borne by the employees and the portion borne by the employers.
D)  increase the burden of the tax on the employees.

Exam 18: Using Input Market Analysis