Deck 17: Work and the Labor Market

Question 1

Discrimination based on characteristics that are related to job performance may be in the economic best interests of a firm.

Answer 1

True

Question 2

A market in which a single firm hires labor, but workers compete against one another for jobs, is a bilateral monopoly.

Answer 2

False

Question 3

Institutional discrimination exists when employers refuse to hire certain workers based on factors not related to job performance.

Answer 3

False

Question 4

If a large group of people are willing to enter the labor market when wages rise, the market labor supply will be highly elastic even if individuals' supply curves are inelastic.

Question 5

The supply of labor generally is considered to be downward-sloping because the opportunity cost of leisure decreases as wages increase.

Question 6

The labor market is a market in which:

A)labor supply and labor demand alone determine wages and employment.
B)social and political pressures are particularly strong.
C)the invisible hand operates unimpeded by other forces.
D)firms determine the supply of labor.

Question 7

The more elastic the demand for the good labor produces, the less elastic the demand for labor.

Question 8

Some suggest that many New York taxi drivers set an income goal for the week and finish work once they have achieved that goal. Since the effective hourly wage is higher on busy days, choosing to stop working when a particular income goal is reached is:

A)consistent with an upward-sloping labor supply curve since the quantity of labor supplied is higher when the wage is higher.
B)consistent with an upward-sloping labor supply curve since the quantity of labor supplied is lower when the wage is higher.
C)inconsistent with an upward-sloping labor supply curve since the quantity of labor supplied is lower when the wage is higher.
D)inconsistent with an upward-sloping labor supply curve since the quantity of labor supplied is higher when the wage is higher.

Question 9

Which of the following is most likely to reduce the supply of labor?

A)An increase in population
B)An increase in the value placed on leisure by workers
C)A decrease in the value placed on leisure by workers
D)A decrease in labor productivity

Question 10

The marginal income tax rate is a person's tax burden as a percentage of total income.

Question 11

The higher the after-tax wage, the greater the quantity of labor supplied.

Question 12

Some suggest that many New York taxi drivers set an income goal for the week and finish work once they have achieved that goal. If this is true, on busy days when the effective hourly wage is higher, taxi drivers will:

A)work the same number of hours as they will on slower days.
B)work fewer hours than they will on slower days.
C)work more hours than they will on slower days.
D)not work any hours.

Question 13

An increase in the marginal income tax rate will increase the quantity of labor supplied.

Question 14

Efficiency wages are above-market wages that are paid to workers to keep them productive.

Question 15

The labor supply curve is generally considered to be upward-sloping because the opportunity cost of leisure:

A)increases as wages get higher.
B)decreases as wages get higher.
C)remains unchanged as wages get higher.
D)has nothing to do with wages.

Question 16

The demand for labor is derived from the demand for output.

Question 17

When wages rise:

A)the quantity of labor supplied always declines.
B)neither the opportunity cost of an hour of leisure nor the quantity of labor supplied is likely to change.
C)the opportunity cost of an hour of leisure declines.
D)the opportunity cost of an hour of leisure increases.

Question 18

The opportunity cost of leisure:

A)increases as wages get higher.
B)decreases as wages get higher.
C)remains the same as wages get higher.
D)has nothing to do with wages.

Question 19

When wages rise, the opportunity cost of:

A)labor falls.
B)labor rises.
C)leisure falls.
D)leisure rises.

Question 20

Comparable worth laws can be justified by the fact that wages are determined exclusively by market forces.

Question 21

The elasticity of the labor supply curve depends on all of the following factors except:

A)individuals' opportunity cost of working.
B)the number of workers who enter or leave the labor market as the wage rate changes.
C)the elasticity of demand for a firm's output.
D)the elasticity of individuals' labor supply curves.

Question 22

The demand for labor is a derived demand because:

A)many workers are self-employed.
B)the income workers earn adds to the demand for output.
C)the demand for output comes from the demand for labor.
D)the demand for labor comes from the demand for output.

Question 23

When the labor supply curve is inelastic:

A)the percentage change in the quantity of labor supplied exceeds the percentage change in the wage.
B)the percentage change in the quantity of labor supplied is less than the percentage change in the wage.
C)the percentage change in the quantity of labor supplied equals the percentage change in the wage.
D)employers cannot lower wages without losing all their workers.

Question 24

Existing employees prefer:

A)inelastic supplies of labor.
B)elastic supplies of labor.
C)unit-elastic supplies of labor.
D)negative elastic supplies of labor.

Question 25

If the quantity of labor supplied increases by 5 percent when the wage increases by 10 percent, the elasticity of labor supply is:

A)1/5.
B)1/2.
C)2.
D)5.

Question 26

If the government simultaneously increases marginal income tax rates and unemployment compensation, the:

A)incentive to work will increase.
B)incentive to work will diminish.
C)incentive to work will not change.
D)effect on the incentive to work cannot be predicted.

Question 27

Suppose the government reduces marginal income tax rates and increases welfare payments. This policy combination will:

A)increase the incentive to work.
B)reduce the incentive to work.
C)have no effect on the incentive to work.
D)have an ambiguous effect on the incentive to work.

Question 28

If a person works 10 percent fewer hours after being given a raise of 20 percent, the individual's elasticity of labor supply is:

A).5.
B)−.5.
C)2.
D)−2.

Question 29

A labor supply elasticity of 0.1 means that a wage increase of 10 percent will:

A)reduce the quantity of labor supplied by 10 percent.
B)increase the quantity of labor supplied by 10 percent.
C)increase the quantity of labor supplied by 1 percent.
D)reduce the quantity of labor supplied by 1 percent.

Question 30

The marginal income tax rate is:

A)always less than the average tax rate.
B)always equal to the average tax rate.
C)the tax rate applied to all income.
D)the tax rate applied to an additional dollar of income.

Question 31

The elasticity of labor supply:

A)should be greater for a state than for a town because people can travel more easily between states than between towns.
B)should be greater for a town than for a state because people are more likely to consider work in a neighboring town than in another state.
C)for a town should equal the elasticity of labor supply for a state.
D)for a town is not related to the elasticity of labor supply for a state.

Question 32

The effect of a change in the wage rate on the number of hours people are willing and able to work is stronger when the:

A)demand for labor is elastic.
B)demand for labor is inelastic.
C)supply of labor is elastic.
D)supply of labor is inelastic.

Question 33

If the marginal income tax rate falls from 50 percent to 40 percent:

A)the average tax rate rises.
B)the incentive to work becomes stronger.
C)the incentive to work becomes weaker.
D)after-tax wages decline.

Question 34

If an increase in the hourly wage rate from $5 to $6 causes a worker to work 5 hours rather than 4, the worker's elasticity of labor supply is equal to:

A)0.8.
B)1.25.
C)0.833.
D)2.

Question 35

A higher marginal income tax rate reduces incentives to work because:

A)leisure and other non-market activities aren't taxed, and so their relative price goes down.
B)leisure and other non-market activities aren't taxed, and so their relative price goes up.
C)the opportunity cost of leisure remains constant while after-tax wages fall.
D)the opportunity cost of leisure increases with the marginal income tax rate.

Question 36

A labor supply elasticity of 1.4 means that a wage increase of:

A)10 percent will reduce the quantity of labor supplied by 14 percent.
B)10 percent will increase the quantity of labor supplied by 14 percent.
C)14 percent will reduce the quantity of labor supplied by 10 percent.
D)14 percent will increase the quantity of labor supplied by 10 percent.

Question 37

If increasing the hourly wage rate from $10 to $15 causes a worker to work 50 hours rather than 40, the worker's elasticity of labor supply is equal to:

A)0.05.
B)1.8.
C)0.50.
D)2.

Question 38

The labor demand curve:

A)shifts out when wages fall.
B)shifts in when wages rise.
C)slopes up because of the law of demand.
D)slopes down because of the law of demand.

Question 39

The incentive effect refers to how much a person will change his or her:

A)hours worked in response to a change in the wage rate.
B)wage rate in response to a change in productivity.
C)quantity demanded of a taxed good in response to a change in the tax rate.
D)wage rate in response to a change in the tax rate on earnings.

Question 40

An increase in the marginal income tax rate is likely to:

A)increase the quantity of labor supplied.
B)decrease the quantity of labor supplied.
C)decrease the quantity of labor demanded.
D)increase the quantity of labor demanded.

Question 41

According to the author, the development of complex algorithms that perform "brain work" in the future is most likely to:

A)shorten the overall workweek.
B)reduce overall employment.
C)make the distribution of income more equal.
D)make the distribution of income less equal.

Question 42

A firm's demand for labor is derived from the:

A)opportunity costs associated with labor and leisure.
B)desires and needs of the entrepreneur.
C)cost of labor inputs.
D)demand for its output.

Question 43

Which of the following does Luddite reasoning get correct?

A)Historically, the demand for labor has actually increased as technology has advanced.
B)Labor is necessary for building and maintaining machines, and so increased demand for machines increases the demand for labor.
C)New technology tends to raise total output, leading to an increase in the demand for labor.
D)New technology frequently causes some specialized labor skills to become obsolete.

Question 44

A decrease in the wages of truck drivers might be explained by which of the following factors?

A)An increase in the price of gasoline
B)An increase in competition within the trucking industry
C)An increase in the demand for transportation
D)An increase in the cost of air freight

Question 45

An increase in the wages of truck drivers might be explained by which of the following factors?

A)A reduction in the price of rail transportation
B)An increase in competition within the trucking industry
C)A reduction in the demand for transportation
D)An increase in the price of gasoline

Question 46

The information revolution is:

A)reducing overall employment.
B)changing the nature of employment.
C)increasing manufacturing employment.
D)putting upward pressure on wages.

Question 47

Which of the following statements best illustrates "Luddite reasoning"?

A)Technology makes it possible to replace workers with machines, and so it will decrease the overall demand for labor.
B)New technology changes the type of labor demanded.
C)Technology increases total output, and so it will increase the demand for labor.
D)Labor is necessary for building and maintaining machines, and so increased demand for machines increases the demand for labor.

Question 48

If the demand for legal services decreases, the demand for legal assistants probably will:

A)not be affected.
B)increase.
C)decrease.
D)change in a manner that cannot be predicted.

Question 49

The elasticity of labor demand is higher when:

A)there are many substitutes for labor in the production process.
B)the inputs that could be substituted for labor are relatively expensive.
C)a large amount of labor is essential to the production process.
D)labor productivity falls rapidly when output is increased.

Question 50

If robotics and factory automation become more widespread in an industry and all else is held constant:

A)both the demand for labor in that industry and the wage rate should increase.
B)both the demand for labor in that industry and the wage rate should decrease.
C)the demand for labor should decrease in that industry and the wage rate should increase.
D)the demand for labor should increase in that industry and the wage rate should decrease.

Question 51

Labor demand is less elastic when:

A)there are many substitutes for labor in the production process.
B)the inputs that could be substituted for labor are relatively inexpensive.
C)a large amount of labor is essential to the production process.
D)the demand for output is more elastic.

Question 52

Historically, technology has:

A)improved and the demand for labor has decreased as output has increased.
B)improved and the demand for labor has increased as output has increased.
C)worsened and the demand for labor has decreased as output has decreased.
D)worsened and the demand for labor has increased as output has decreased.

Question 53

If the demand for widgets decreases, this will:

A)increase the supply of inputs used to produce widgets.
B)decrease the supply of inputs used to produce widgets.
C)increase the demand for inputs used to produce widgets.
D)decrease the demand for inputs used to produce widgets.

Question 54

The development of complex algorithms that perform "brain work" in the future is likely to:

A)lengthen the overall workweek.
B)increase overall employment.
C)higher income equality.
D)increase the number of jobs requiring little thought.

Question 55

The elasticity of labor demand does not depend on the:

A)elasticity of demand for the firm's product.
B)relative importance of the factor in the production process.
C)possibility of and cost of substitution in production.
D)elasticity of labor supply.

Question 56

Entrepreneurship could best be classified as:

A)creative labor.
B)simple labor.
C)unskilled labor.
D)highly specialized labor.

Question 57

Which of the following will not shift the demand for labor to the right?

A)An increase in the price of a competing input
B)An increase in the demand for output
C)An increase in the wage rate
D)An increase in the competitiveness of an industry

Question 58

If the productivity of labor diminishes only slowly as output increases, labor:

A)demand will most likely be inelastic.
B)demand will most likely be elastic.
C)supply will most likely be elastic.
D)supply will most likely be inelastic.

Question 59

Which of the following will shift the labor demand curve to the right?

A)An increase in the price of a competing, substitute input
B)A reduction in the demand for the output produced by labor
C)A reduction in the wage rate
D)An increase in the use of factory automation

Question 60

If there are a number of inexpensive substitutes for labor in the production process, labor:

A)demand will most likely be elastic.
B)demand will most likely be inelastic.
C)supply will most likely be elastic.
D)supply will most likely be inelastic.

Question 61

Suppose both wages and employment decrease. These changes most likely were caused by:

A)a decline in immigration.
B)an increase in emigration.
C)an increase in the working age population.
D)a decline in business activity in the economy.

Question 62

The marginal factor cost curve for a monopsony:

A)lies above the labor supply curve.
B)lies below the labor supply curve.
C)is the labor supply curve.
D)is unrelated to the labor supply curve.

Question 63

A reduction in the supply of labor will cause wages to:

A)decrease and employment to decrease.
B)increase and employment to decrease.
C)increase and employment to increase.
D)decrease and employment to increase.

Question 64

A single union that supplies all the labor in a particular market is an example of:

A)a monopsony.
B)a monopoly.
C)a bilateral monopoly.
D)an oligopoly.

Question 65

A reduction in the demand for labor will cause wages to:

A)decrease and employment to increase.
B)decrease and employment to decrease.
C)increase and employment to decrease.
D)increase and employment to increase.

Question 66

If the wages and productivity of U.S. workers are higher than those of Mexican workers, a Japanese company would:

A)build a plant in the United States.
B)build a plant in Mexico.
C)be indifferent about where the plant is built.
D)require more information before deciding where the plant is built.

Question 67

Two members of the Kenyan parliament from coffee-growing areas said that no firm should have a monopoly to market Kenyan coffee. The retail coffee company Tetu Coffee has sparked a storm in the industry by promising to earn the country Sh400 (Kenyan Shilling)billion annually if given exclusive licenses to market Kenyan coffee. The members of parliament said the coffee bean farmers should be free to sell their beans to the highest bidder. What would create a market with one buyer in the situation described?

A)The government prohibits other buyers.
B)There are economies of scale in purchasing coffee.
C)Tetu Coffee has the ability to outcompete other coffee buyers.
D)There are economies of scope.

Question 68

The focal point phenomenon:

A)explains why production tends to take place in countries that have fewer trade barriers.
B)explains why production tends to take place in a few select countries rather than being evenly distributed across countries.
C)argues that transportation costs make it unprofitable to locate production in other countries.
D)argues that trade barriers force countries to locate production in other countries.

Question 69

Suppose both wages and employment increase. These changes most likely were caused by:

A)an increase in labor demand.
B)an increase in labor supply.
C)a decrease in labor demand.
D)a decrease in labor supply.

Question 70

A monopsonist will pay a wage that:

A)is greater than that in a perfectly competitive labor market.
B)is the same as that in a perfectly competitive labor market.
C)is less than that in a perfectly competitive labor market.
D)may be greater than, less than, or equal to that in a perfectly competitive labor market, depending on labor supply.

Question 71

Two members of the Kenyan parliament from coffee-growing areas said that no firm should have a monopoly to market Kenyan coffee. The retail coffee company Tetu Coffee has sparked a storm in the industry by promising to earn the country Sh400 (Kenyan Shilling)billion annually if given exclusive licenses to market Kenyan coffee. The members of parliament said the coffee bean farmers should be free to sell their beans to the highest bidder. If all coffee growers had to sell their produce to Tetu Coffee, this would be a(n):

A)natural monopoly.
B)price-discriminating monopoly.
C)oligopoly.
D)monopsony.

Question 72

Suppose a firm is contractually obligated to pay workers $25 per hour despite the fact that the market-clearing wage is $19 per hour. If there are 500 qualified applicants but only 350 job openings, it is likely that:

A)the firm will hire 350 workers at $25 per hour and 150 workers at $19 per hour.
B)the firm will go bankrupt.
C)jobs will have to be rationed in some way, and the firm may use non-job-related qualities to do so.
D)the market eventually will clear at a wage rate between $19 and $25.

Question 73

The optimal level of employment for a monopsonist corresponds to the point where labor:

A)demand intersects labor supply.
B)supply intersects marginal factor cost.
C)demand intersects marginal factor cost.
D)supply intersects marginal revenue product.

Question 74

Other things held constant in a competitive labor market, if workers negotiate a contract in which the employer agrees to pay an hourly wage rate of $17.85 while the market equilibrium hourly wage rate is $16.50, the:

A)quantity of workers supplied will exceed the quantity of workers demanded.
B)quantity of workers demanded will exceed the quantity of workers supplied.
C)demand for labor will increase until the equilibrium wage rate is $17.85.
D)supply of labor will decrease until the equilibrium wage rate is $17.85.

Question 75

Suppose wages increase but employment decreases. These changes most likely were caused by:

A)an increase in labor demand.
B)an increase in labor supply.
C)a decrease in labor demand.
D)a decrease in labor supply.

Question 76

Which of the following factors most likely would explain why a U.S. company would choose to operate in the United States despite much lower wages in Mexico?

A)The low cost of transportation between the two countries
B)The lower productivity of Mexican workers
C)The absence of significant trade barriers
D)The presence of many Japanese companies in Mexico

Question 77

A monopsonist facing many suppliers of labor will employ:

A)fewer workers than a firm operating in a perfectly competitive labor market.
B)the same number of workers as a firm operating in a perfectly competitive labor market.
C)more workers than a firm operating in a perfectly competitive labor market.
D)an indeterminate number of workers.

Question 78

If a union gains significant monopoly power in a competitive market, employment:

A)and wages should increase.
B)and wages should decrease.
C)should increase and wages should decrease.
D)should decrease and wages should increase.

Question 79

If a single union supplies all the labor in a competitive labor market, the union probably will:

A)increase labor supply to raise employment.
B)restrict labor supply to raise wages.
C)increase union membership to increase wages.
D)behave as a monopsonist.

Question 80

According to the textbook author, who is most likely to do well as a result of the information revolution?

A)College graduates in general
B)Authors of textbooks
C)Manufacturing workers
D)Designers of algorithms