Question 1

Suppose that the market for labor is initially in equilibrium. A decrease in the price of output will cause the equilibrium wage
A)and the equilibrium quantity of labor to rise.
B)and the equilibrium quantity of labor to fall.
C)to rise and the equilibrium quantity of labor to fall.
D)to fall and the equilibrium quantity of labor to rise.

Accepted Answer

A decrease in the price of output indicates a decrease in demand for the firm's product or service. This will lead to lower revenue and as a result, the firm will reduce the amount of labor it requires. This decrease in demand for labor will cause a decrease in the equilibrium wage and the equilibrium quantity of labor. Therefore, choice B is the correct answer.

Question 2

Suppose that technological progress increases the productivity of teachers. Which of the following accurately describes the labor market for teachers after the technological change? Equilibrium wages will
A)rise, and the equilibrium quantity of teachers employed will fall.
B)rise, and the equilibrium quantity of teachers employed will rise.
C)fall, and the equilibrium quantity of teachers employed will fall.
D)fall, and the equilibrium quantity of teachers employed will rise.

Accepted Answer

An increase in productivity of teachers due to technological progress will shift the demand curve for teachers to the right. This will increase both the equilibrium wage and the equilibrium quantity of teachers employed. Therefore, Option B is the correct choice.

Question 3

Figure 18-10 -Refer to Figure 18-10. Which of the following would shift of the labor demand curve from D₁ to D₂? A)a change in workers' attitudes toward the work-leisure tradeoff B)decreases in wages in other labor markets C)an increase in the price of firms' output D)All of the above are correct.

Accepted Answer

An increase in the price of firms' output would increase the demand for labor, shifting the labor demand curve to the right from D₁ to D₂. Changes in workers' attitudes toward work-leisure tradeoff and decreases in wages in other labor markets may affect the labor supply curve, but not the labor demand curve.

Question 4

Figure 18-9 
-Refer to Figure 18-9. If the price of apples increases, the
A)demand for apple pickers will shift to the left.
B)demand for apple pickers will shift to the right.
C)supply of apple pickers will shift to the left.
D)supply of apple pickers will shift to the right.

Accepted Answer

When the price of apples increases, more profit is made by apple farmers, leading to an increase in the demand for apple pickers to harvest more apples. This shifts the demand curve to the right. Therefore, the answer is B.

Question 5

Suppose that the market for labor is initially in equilibrium. If the firm employs labor-augmenting technology, the equilibrium wage
A)and the equilibrium quantity of labor will rise.
B)and the equilibrium quantity of labor will fall.
C)will rise, and the equilibrium quantity of labor will fall.
D)will fall, and the equilibrium quantity of labor will rise.

Accepted Answer

Labor-augmenting technology increases the productivity of labor. This results in an increase in the demand for labor, causing the equilibrium wage to rise. As the wage rises, more workers are willing to supply labor, resulting in an increase in the equilibrium quantity of labor. Therefore, both the equilibrium wage and quantity of labor will rise.

Question 6

Suppose that the market for labor is initially in equilibrium. An increase in the price of output will cause the equilibrium wage
A)and the equilibrium quantity of labor to rise.
B)and the equilibrium quantity of labor to fall.
C)to rise and the equilibrium quantity of labor to fall.
D)to fall and the equilibrium quantity of labor to rise.

Accepted Answer

An increase in the price of output signals an increase in demand for the goods and services produced, which will lead to an increase in the demand for labor. With a fixed supply of labor, the equilibrium wage will rise and the equilibrium quantity of labor will also increase as more workers are attracted to the higher wage. Therefore, the correct answer is A.

Question 7

Figure 18-10 -Refer to Figure 18-10. When the relevant labor demand curve is D₁ and the labor market is in equilibrium, A)the value of the marginal product of labor to firms is less than W₁. B)the opportunity cost of leisure to workers is greater than W₁. C)the wage is W₁. D)All of the above are correct.

Accepted Answer

In equilibrium, the wage is determined where the labor demand curve intersects with the labor supply curve, which is W₁ in this case. The value of the marginal product of labor to firms and the opportunity cost of leisure to workers may be different, but they are not relevant to determining the equilibrium wage.

Question 8

Consider the labor market for computer programmers. Because of the dot.com boom in the late 1990s, a lot of workers went to school to learn how to write computer code for one of thousands of new dot.com companies. However, when these computer programming students graduated the dot.com bust took place. The dot.com bust decreased the value of the marginal product of computer programmers. Holding all else equal what effect did these two circumstances have on the equilibrium quantity in the labor market for computer programmers?
A)The equilibrium quantity of labor increased.
B)The equilibrium quantity of labor decreased.
C)The equilibrium quantity of labor did not change.
D)It is not possible to determine what happens to the equilibrium quantity of labor.

Accepted Answer

The answer of Consider the labor market for computer programmers....

Question 9

Figure 18-10 -Refer to Figure 18-10. If the relevant labor demand curve is D₂ and the current wage is W₁, A)there is a surplus of labor. B)there is a shortage of labor. C)the quantity of labor supplied exceeds the quantity of labor demanded. D)workers are failing to take into account the work-leisure tradeoff in deciding what quantity of labor to supply at alternative wages.

Accepted Answer

The answer of Figure 18-10 
-Refer to Figure 18-10. If...

Question 10

Figure 18-9 -Refer to Figure 18-9. If the marginal product of labor falls and the price of apples remains unchanged, (i)the value of the marginal product of labor will fall. (ii)the quantity of labor demanded will increase above L₁. (iii)the labor supply curve will remain unchanged. A)(i) and (ii) only B)(ii) and (iii) only C)(i) and (iii) only D)(i), (ii), and (iii)

Accepted Answer

The value of the marginal product of labor will fall because it is the product of the marginal product of labor and the price of apples, which remains unchanged. The labor supply curve is not affected by changes in the marginal product of labor.

Question 11

Figure 18-9 
-Refer to Figure 18-9. If the price of apples decreases, the equilibrium wage will
A)increase, and more apple pickers will be hired.
B)decrease, and more apple pickers will be hired.
C)increase, and fewer apple pickers will be hired.
D)decrease, and fewer apple pickers will be hired.

Accepted Answer

According to the diagram, a decrease in the price of apples would shift the demand curve for apple pickers to the left, leading to a decrease in the equilibrium wage and a decrease in the quantity of apple pickers hired. Therefore, the best choice would be D.

Question 12

Consider the labor market for computer programmers. During the late 1990s, the value of the marginal product of all computer programmers increased dramatically. Holding all else equal, the equilibrium wage in the labor market for computer programmers
A)increased.
B)decreased.
C)did not change.
D)It is not possible to determine the equilibrium wage.

Accepted Answer

When the value of the marginal product of computer programmers increases, it means that the additional output created by an additional computer programmer is more valuable. This will increase the demand for computer programmers, leading to an increase in their equilibrium wage. Thus, the answer is (A) increased.

Question 13

Suppose that the market for labor is initially in equilibrium. If the firm employs labor-saving technology, the equilibrium wage
A)and the equilibrium quantity of labor will rise.
B)and the equilibrium quantity of labor will fall.
C)will rise, and the equilibrium quantity of labor will fall.
D)will fall, and the equilibrium quantity of labor will rise.

Accepted Answer

The answer of Suppose that the market for labor is...

Question 14

Figure 18-10 -\Refer to Figure 18-10. Assume W₁ = $20 and W₂ = $22, and the market is always in equilibrium. A shift of the labor demand curve from D₁ to D₂ would A)increase the value of the marginal product of labor by $2. B)increase the value of the marginal product of labor by less than $2. C)decrease the value of the marginal product of labor by more than $2. D)not change the value of the marginal product of labor.

Accepted Answer

A shift in the labor demand curve from D₁ to D₂ would increase the wage rate from $20 to $22, while the marginal product of labor remains constant. Thus, the increase in wage rate by $2 will cause an increase in the value of the marginal product of labor by $2. Therefore, the correct choice is A.

Question 15

Consider the labor market for computer programmers. Because of the dot.com boom in the late 1990s, a lot of workers went to school to learn how to write computer code for one of thousands of new dot.com companies. However, when these computer programming students graduated, the dot.com bust took place. The dot.com bust decreased the value of the marginal product of computer programmers. Holding all else equal, what effect did these two circumstances have on the equilibrium wage in the labor market for computer programmers?
A)The equilibrium wage increased.
B)The equilibrium wage decreased.
C)The equilibrium wage did not change.
D)It is not possible to determine what happens to the equilibrium wage.

Accepted Answer

The increase in the number of computer programming students increased the supply of labor in the labor market for computer programmers, and the dot.com bust decreased the demand for computer programmers, leading to a surplus of labor. This surplus of labor would drive down the equilibrium wage in the labor market, as employers would have more workers to choose from and would not need to offer high wages to attract new hires. Therefore, the equilibrium wage decreased.

Question 16

Figure 18-9 
-Refer to Figure 18-9. If the price of apples decreases, the
A)demand for apple pickers will shift to the left.
B)demand for apple pickers will shift to the right.
C)supply of apple pickers will shift to the left.
D)supply of apple pickers will shift to the right.

Accepted Answer

The answer of Figure 18-9 
-Refer to Figure 18-9. If...

Question 17

Consider the labor market for computer programmers. During the late 1990s, the value of the marginal product of all computer programmers increased dramatically. Holding all else equal, what effect did this process have on the labor market for computer programmers? The equilibrium wage
A)increased, and the equilibrium quantity of labor increased.
B)increased, and the equilibrium quantity of labor decreased.
C)decreased, and the equilibrium quantity of labor increased.
D)decreased, and the equilibrium quantity of labor decreased.

Accepted Answer

The increase in the value of the marginal product of computer programmers would lead to an increase in demand for their services. This would, in turn, increase their equilibrium wage and the equilibrium quantity of labor supplied. Since all other factors are held constant, the only effect on the labor market for computer programmers would be an increase in the wage rate and quantity of labor employed.

Question 18

Figure 18-9 
-Refer to Figure 18-9. If the price of apples increases, the equilibrium wage will
A)increase, and more apple pickers will be hired.
B)decrease, and more apple pickers will be hired.
C)increase, and fewer apple pickers will be hired.
D)decrease, and fewer apple pickers will be hired.

Accepted Answer

The answer of Figure 18-9 
-Refer to Figure 18-9. If...

Question 19

Figure 18-10 -Refer to Figure 18-10. Which of the following would shift of the labor demand curve from D₁ to D₂? A)technological progress B)an increase in the price of firms' output C)an increase in the supply of a relevant factor of production other than labor D)All of the above are correct.

Accepted Answer

The answer of Figure 18-10 
-Refer to Figure 18-10. Which...

Question 20

Consider the labor market for computer programmers. During the late 1990s, the value of the marginal product of all computer programmers increased dramatically. Holding all else equal, the equilibrium quantity in the labor market for computer programmers
A)increased.
B)decreased.
C)did not change.
D)It is not possible to determine the equilibrium quantity.

Accepted Answer

When the value of the marginal product of computer programmers increases, this means that the demand for programmers has increased. As a result, employers are willing to pay higher wages to attract and retain programmers. This will lead to an increase in the quantity of programmers hired and employed, resulting in an increase in the equilibrium quantity in the labor market for computer programmers.

Quiz 18: The Markets for the Factors of Production

Suppose that the market for labor is initially in equilibrium. A decrease in the price of output will cause the equilibrium wage

Suppose that technological progress increases the productivity of teachers. Which of the following accurately describes the labor market for teachers after the technological change? Equilibrium wages will

Figure 18-10 -Refer to Figure 18-10. Which of the following would shift of the labor demand curve from D₁ to D₂?

Figure 18-9 -Refer to Figure 18-9. If the price of apples increases, the

Suppose that the market for labor is initially in equilibrium. If the firm employs labor-augmenting technology, the equilibrium wage

Suppose that the market for labor is initially in equilibrium. An increase in the price of output will cause the equilibrium wage

Figure 18-10 -Refer to Figure 18-10. When the relevant labor demand curve is D₁ and the labor market is in equilibrium,

Figure 18-10 -Refer to Figure 18-10. If the relevant labor demand curve is D₂ and the current wage is W₁,

Figure 18-9 -Refer to Figure 18-9. If the marginal product of labor falls and the price of apples remains unchanged, (i) the value of the marginal product of labor will fall. (ii) the quantity of labor demanded will increase above L₁. (iii) the labor supply curve will remain unchanged.

Figure 18-9 -Refer to Figure 18-9. If the price of apples decreases, the equilibrium wage will

Consider the labor market for computer programmers. During the late 1990s, the value of the marginal product of all computer programmers increased dramatically. Holding all else equal, the equilibrium wage in the labor market for computer programmers

Suppose that the market for labor is initially in equilibrium. If the firm employs labor-saving technology, the equilibrium wage

Figure 18-9 -Refer to Figure 18-9. If the price of apples decreases, the

Consider the labor market for computer programmers. During the late 1990s, the value of the marginal product of all computer programmers increased dramatically. Holding all else equal, what effect did this process have on the labor market for computer programmers? The equilibrium wage

Figure 18-9 -Refer to Figure 18-9. If the price of apples increases, the equilibrium wage will

Figure 18-10 -Refer to Figure 18-10. Which of the following would shift of the labor demand curve from D₁ to D₂?

Consider the labor market for computer programmers. During the late 1990s, the value of the marginal product of all computer programmers increased dramatically. Holding all else equal, the equilibrium quantity in the labor market for computer programmers

Quiz 18: The Markets for the Factors of Production

Suppose that the market for labor is initially in equilibrium. A decrease in the price of output will cause the equilibrium wage

Suppose that technological progress increases the productivity of teachers. Which of the following accurately describes the labor market for teachers after the technological change? Equilibrium wages will

Figure 18-10 -Refer to Figure 18-10. Which of the following would shift of the labor demand curve from D1 to D2?

Figure 18-9 -Refer to Figure 18-9. If the price of apples increases, the

Suppose that the market for labor is initially in equilibrium. If the firm employs labor-augmenting technology, the equilibrium wage

Suppose that the market for labor is initially in equilibrium. An increase in the price of output will cause the equilibrium wage

Figure 18-10 -Refer to Figure 18-10. When the relevant labor demand curve is D1 and the labor market is in equilibrium,

Figure 18-10 -Refer to Figure 18-10. If the relevant labor demand curve is D2 and the current wage is W1,

Figure 18-9 -Refer to Figure 18-9. If the marginal product of labor falls and the price of apples remains unchanged, (i) the value of the marginal product of labor will fall. (ii) the quantity of labor demanded will increase above L1. (iii) the labor supply curve will remain unchanged.

Figure 18-9 -Refer to Figure 18-9. If the price of apples decreases, the equilibrium wage will

Consider the labor market for computer programmers. During the late 1990s, the value of the marginal product of all computer programmers increased dramatically. Holding all else equal, the equilibrium wage in the labor market for computer programmers

Suppose that the market for labor is initially in equilibrium. If the firm employs labor-saving technology, the equilibrium wage

Figure 18-10 -\Refer to Figure 18-10. Assume W1 = $20 and W2 = $22, and the market is always in equilibrium. A shift of the labor demand curve from D1 to D2 would

Figure 18-9 -Refer to Figure 18-9. If the price of apples decreases, the

Consider the labor market for computer programmers. During the late 1990s, the value of the marginal product of all computer programmers increased dramatically. Holding all else equal, what effect did this process have on the labor market for computer programmers? The equilibrium wage

Figure 18-9 -Refer to Figure 18-9. If the price of apples increases, the equilibrium wage will

Figure 18-10 -Refer to Figure 18-10. Which of the following would shift of the labor demand curve from D1 to D2?

Consider the labor market for computer programmers. During the late 1990s, the value of the marginal product of all computer programmers increased dramatically. Holding all else equal, the equilibrium quantity in the labor market for computer programmers

Figure 18-10 -Refer to Figure 18-10. Which of the following would shift of the labor demand curve from D₁ to D₂?

Figure 18-10 -Refer to Figure 18-10. When the relevant labor demand curve is D₁ and the labor market is in equilibrium,

Figure 18-10 -Refer to Figure 18-10. If the relevant labor demand curve is D₂ and the current wage is W₁,

Figure 18-9 -Refer to Figure 18-9. If the marginal product of labor falls and the price of apples remains unchanged, (i) the value of the marginal product of labor will fall. (ii) the quantity of labor demanded will increase above L₁. (iii) the labor supply curve will remain unchanged.

Figure 18-10 -Refer to Figure 18-10. Which of the following would shift of the labor demand curve from D₁ to D₂?