Quiz 17: The Markets for Labor and Other Factors of Production

In a market economy,the high salaries of some star baseball players such as Adrian Gonzalez,are determined by A) team owners, based on the total number of star athletes they plan to hire. B) advertising companies, based on what they are willing to pay to advertise their products at baseball games. C) the interaction of the demand for star athletes and the supply of star athletes. D) consumers, based on their willingness to watch baseball games.

The labor market is considered as one of the more important markets in an economy because A) most people typically earn the bulk of their income from wages and salaries. B) most people are concerned that wages determined in the labor market are unfair. C) the usual market forces do not hold in the labor market. D) the labor market does not reach an equilibrium.

Demand in factor markets differs from demand in product markets in that A) the demand for a factor of production is difficult to determine. B) the demand for a factor of production is influenced by workers' productivity and by the producers' expected sales revenues, not by tastes and preferences of consumers. C) demand for a factor of production is based on the tastes and preferences of firms. D) demand for a factor of production is based on the tastes and preferences of resource owners.

The demand for labor is described as a derived demand because A) it is derived by workers seeking to earn income to fund the consumption of goods and services. B) it is derived by producers seeking to make profits by starting new businesses. C) it is derived from the demand for products that use labor in the production process. D) it is derived from government institutions which rely on labor markets for the purpose of raising tax revenue.

Which of the following is not an example of a derived demand? A) Several of the animated films released between 1999 and 2001 failed to earn a profit, which caused some companies to stop making these films, thereby decreasing the demand for animators. B) Seth Bullock, a personal-injury attorney, complains that he is earning far less now than a few years ago largely because personal injury cases have been undercut by state laws limiting class-action suits and payouts on damages. C) Millicent Manning, the owner of a furniture store, is concerned that her sales have fallen for the past six months. She attributes this to the downturn in the real estate market. D) As advancements in medical technology increase the safety and success of laser eye surgery, the demand for opticians has decreased.

Marginal revenue product of labor for a competitive seller is A) the change in total product from hiring one more worker. B) equal to the marginal product of labor multiplied by the output price. C) the output price multiplied by the quantity sold. D) the marginal revenue of the product multiplied by the output price.

Suppose you have worked at a local sandwich shop for six months and now you plan to ask your manager for a raise.How can you convince your manager that you are worth more money than you are currently being paid? A) by threatening to quit if he refuses to give you a raise B) by demonstrating to your manager the marginal revenue product your employment contributes to the sandwich shop C) by explaining to him how difficult it is for you to save enough money to go to college D) by convincing him that you are a dedicated worker and ready to take on more responsibilities at the shop

Marginal revenue product for a perfectly competitive seller is equal to A) the output price multiplied by the total product of labor. B) the output price multiplied by the number workers hired. C) the change in total revenue that results from hiring another worker. D) the marginal cost of production.

What is the difference between labor's marginal product and marginal revenue product? A) The marginal product of labor is the increase in output as a result of hiring an additional worker while the marginal revenue product of labor is the increase in profit as a result of hiring an additional worker. B) The marginal revenue product of labor is the dollar value of hiring an additional worker while the marginal product of labor is the increase in the firm's physical output as a result of hiring an additional worker. C) The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue. D) Labor's marginal product is a measure of labor's productivity while labor's marginal revenue product is a measure of labor's ability to sell the firm's products.

What is the difference between a firm's marginal revenue and its marginal revenue product? A) Marginal revenue is the change in sales revenue from selling one more unit of output while marginal revenue product is the profit earned from hiring one more worker. B) Marginal revenue is the change in sales revenue from selling one more unit of output while marginal revenue product is the change in total revenue from hiring one more worker. C) Marginal revenue is the increase in revenue when a firm raises its output price while marginal revenue product is the increase in marginal product when a firm hires an additional worker. D) There is no difference between the two terms.

Figure 17-1 Figure 17-1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies. -Refer to Figure 17-1.If the wage rate is $40,how many workers should Dale hire? A) 6 units B) 5 units C) 4 units D) 3 units

Figure 17-1 Figure 17-1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies. -Refer to Figure 17-1.If Dale can sell her doilies at $2 each,what is the marginal product of the 5th worker? A) $28 B) 28 doilies C) 14 doilies D) $56

Figure 17-1 Figure 17-1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies. -Refer to Figure 17-1.Suppose the market price of doilies rises to $3.What happens to the curve given in the diagram? A) Nothing, because labor's productivity has not changed. B) There will be a movement along the curve. C) The curve shifts to the right. D) We cannot answer the question without knowing if Dale would want to hire more workers.

A firm's demand for labor curve is also called its A) marginal revenue product of labor curve. B) marginal factor cost of labor curve. C) marginal valuation curve. D) marginal benefit of labor curve.

Table 17-1 -Refer to Table 17-1.The marginal product of the fourth unit of labor is A) 300. B) 75. C) 60. D) 15.

Table 17-1 -Refer to Table 17-1.If the output price is $3,what is the marginal revenue product of the fifth unit of labor? A) $1,050 B) $360 C) $210 D) $150

Table 17-1 -Refer to Table 17-1.Suppose the output price is $3.If the firm represented in the table is maximizing its profit by hiring six workers,what is the wage rate? A) $120 B) $65 C) $40 D) There is insufficient information to answer the question.

Table 17-1 -Refer to Table 17-1.Suppose the output price is $3.If the wage rate is $90,what is the profit-maximizing quantity of labor that the firm should hire? A) 7 units B) 5 units C) 4 units D) 3 units

Firms use information on labor's marginal revenue product to determine 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 labor services to supply at each wage rate.

A reason why a perfectly competitive firm's demand for labor curve slopes downward is that A) each additional unit of labor hired is less efficient than previously hired units. B) in the short run, as more labor is hired, labor's marginal product falls because of the law of diminishing returns. C) the extra cost of hiring additional units of labor increases as a firm hires more units of labor. D) the firm's demand curve for the product that uses labor is downward sloping.

A firm's primary interest when it hires an additional worker is A) the cost of hiring the additional worker. B) how the average output of the firm will be affected by this new worker. C) the extra revenue the firm realizes from hiring that worker. D) whether or not the new worker gets along with the firm's existing workers.

The firm's gain in profit from hiring another worker is A) the marginal revenue product of the extra worker. B) the difference between marginal revenue product and the wage of the worker. C) the extra output of the extra worker. D) the reduction in costs from hiring another worker.

Table 17-2 -Refer to Table 17-2.The firm represented in the diagram A) has market power in the factor market. B) has market power in the output market. C) has market power in both the factor and product market. D) has no market power in the factor or product market.

Table 17-2 -Refer to Table 17-2.The marginal revenue product of labor from the third unit of labor is A) $5,460. B) $1,560. C) $1,260. D) $780.

Table 17-2 -Refer to Table 17-2.The marginal profit from hiring the second unit of labor is A) $4,200. B) $1,960. C) $1,800. D) $1,450.

Table 17-2 -Refer to Table 17-2.What is the profit-maximizing quantity of labor that the firm should hire? A) 5 units B) 4 units C) 3 units D) 2 units

Suppose a competitive firm pays a wage of $12 an hour and sells its product at $3 per unit.Assume that labor is the only input.If hiring another worker would increase output by five units per hour,then to maximize profits the firm should A) not change the number of workers it currently hires. B) lay off some of its workers. C) hire the additional worker. D) There is not enough information to answer the question.

Suppose a competitive firm is paying a wage of $12 an hour and sells its product at $3 per unit.Assume that labor is the only input.If hiring another worker would increase output by three units per hour,then to maximize profits the firm should A) not change the number of workers it currently hires. B) not hire an additional worker. C) hire another worker. D) There is not enough information to answer the question.

Suppose a competitive firm is paying a wage of $12 an hour and sells its product at $3 per unit.Assume that labor is the only input.If the last worker hired increases output by three units per hour,then to maximize profits the firm should A) not change the number of workers it currently hires. B) lay off some of its workers. C) hire additional workers. D) There is not enough information to answer the question.

Let MP = marginal product,P = output price,and W = wage,then the equation that represents the condition where a competitive firm would hire another worker is A) P × MP = W. B) P × MP < W. C) P × MP > W. D) P × W > MP.

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

If a worker can produce 20 units of output which can be sold for $4 per unit,what is the maximum wage that firm should pay to hire this worker? A) $80 B) $80 minus the firm's profit markup C) It depends on what the going wage rate is in the labor market. D) There is insufficient information to answer the question.

Marginal revenue product can be calculated using the formula marginal product × output price A) only if output price is constant. B) only if the marginal product of labor is constant. C) only if the both marginal product of labor and the output price are constant. D) only if the firm has market power in the labor market

An increase in the wage rate causes A) a rightward shift of the firm's labor demand curve. B) a leftward shift of the firm's labor demand curve. C) a decrease in the quantity of labor demanded. D) an increase in labor's marginal productivity.

A decrease in the wage rate causes A) an increase in the quantity of labor demanded. B) a rightward shift of the firm's labor demand curve. C) a leftward shift of the firm's labor demand curve. D) a decrease in labor's productivity.

An increase in a perfectly competitive firm's demand for labor could be caused by A) a decrease in the market wage rate. B) an increase in the market demand for the firm's product. C) a decrease in the marginal product of workers. D) an increase in the quantity of labor supplied.

Which of the following will not cause the labor demand curve to shift to the right? A) an increase in the price of the firm's product B) a technological improvement that increases labor productivity C) an increase in human capital in the labor force D) an increase in the market wage rate

In the legal sector,some practice areas have declined in recent years.For example,personal-injury and medical-malpractice cases have been undercut by state laws limiting class-action suits,out-of-state plaintiffs and payouts on damages,and securities class-action litigation has declined in part because of a buoyant stock market.How does this affect the market for lawyers? A) The demand for lawyers shifts to the left. B) The supply of lawyers shifts to the left. C) The quantity of lawyers demanded decreases and this is represented by a movement along the demand curve. D) Both the demand and supply curves decrease.

If education reform leads to a more skilled and better trained public,the economy would experience A) an increase in human capital. B) an increase in the supply of labor. C) an increase in comparable worth. D) a decrease in compensating differentials.

Education reform could lead to a more skilled and better trained public.A more skilled and better trained public would A) cause the market supply curve for labor to shift to the right. B) cause the market demand curve for labor to shift to the right. C) not shift the market demand curve for labor. D) cause both the market demand curve for labor and the market supply curve for labor to shift to the left.

Labor demand is considered a derived demand because producers do not demand labor for itself but only because labor is used to produce output that consumers desire.

The marginal product of labor is the increase in output as a result of hiring an additional worker while the marginal revenue product of labor is the increase in profit as a result of hiring an additional worker.

Technological advancements that increase labor's productivity shift the labor supply curve to the right.

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

What are the five most important variables that cause the market demand curve for labor to shift?

A firm's labor demand curve is also its marginal revenue product curve.For both the perfectly competitive firm and the output price maker,the labor demand curve slopes downwards.However,there is a difference in the reasons why the labor demand curve slopes downwards.What is this difference?

Table 17-3 -Refer to Table 17-3.Oil Can Harry's,a new automobile service shop,is ready to start hiring.The table above shows the relationship between the number of mechanics the firm hires and the quantity of oil changes it produces. a.Suppose the price of an oil change is $20.Complete the table by filling in the values for marginal product and marginal revenue product. b.Oil Can Harry's is an input price-taker.Suppose the wage paid to mechanics is $80 per day.What is the profit-maximizing number of mechanics? c.Suppose the wage rate rises to $100 per day. (i)What happens to the firm's demand curve for mechanics? (ii)What happens to the profit-maximizing quantity of mechanics? d.Suppose the wage rate is $60 per day and the price of haircuts is now $15. (i)What happens to the firm's demand curve for mechanics? (ii)What happens to the profit-maximizing quantity of mechanics?

An individual's labor supply curve shows A) the maximum wage rates offered to that individual by various potential employers. B) the relationship between wages and the quantity of labor that she is willing to supply. C) the relationship between wages and the quantity of labor that a firm is willing to employ. D) the relationship between the quantity of hours worked and total income earned by that individual.

The labor supply for an industry would decrease if A) the wage rate falls. B) the percentage of the population from age 16 to 65 decreases. C) the government welcomes foreign workers into the country. D) a greater percentage of women want to work outside the home.

How will an increase in population affect the labor market? A) It will shift the market supply curve. B) It will cause a decrease in the quantity of labor demanded. C) It will increase the supply of jobs. D) It will increase the opportunity cost of leisure.

All of the following will shift the labor supply curve except A) an increase in labor force participation rate among women. B) an increase in the average age of retirement. C) an increase in the wage rate. D) a change in a country's immigration policy.

Which of the following best explains why unemployment rates are higher in the European economies than in the United States? A) More Europeans go to school fulltime and are therefore not able to participate in the labor market. B) Unemployment benefits are more generous in Europe than in the United States. C) Workers in Europe are less productive than workers in the United States. D) European industries pay a lower wage rate than industries in the United States.

If Molly Bee increases her work hours when her wage increases,then A) the income effect of the wage increase outweighs the substitution effect. B) the substitution effect of the wage increase outweighs the income effect. C) leisure is an inferior good to Molly. D) Molly is spending beyond her means.

If Alan Shaw reduces his work hours when his salary increases,then A) the income effect of his salary increase dominates the substitution effect. B) the substitution effect of his salary increase dominates the income effect. C) the income effect of his salary increase is completely offset by the substitution effect. D) leisure is an inferior good to Alan.

At low wages,the labor supply curve for most people slopes upward because A) the supply of labor is perfectly inelastic at low wages. B) as wages increase the opportunity cost of leisure increases. C) as wages increase income also increases unless hours worked decrease. D) the demand for labor is perfectly elastic at low wages.

The substitution effect of a wage increase is observed when A) the higher wage income causes workers to take more leisure and work less. B) leisure's higher opportunity cost causes workers to take less leisure and work more. C) the higher wage income causes workers to take more leisure and work more. D) leisure's higher opportunity cost causes workers to take more leisure and work less.

The income effect of a wage increase is observed when A) the higher wage income causes workers to take more leisure and work less. B) leisure's higher opportunity cost causes workers to take less leisure and work more. C) the higher wage income causes workers to take less leisure and work more. D) leisure's higher opportunity cost causes workers to take more leisure and work less.

The combined effect (both income and substitution)of a wage increase is that A) the substitution effect always dominates, leading to more work at a higher wage. B) the income effect always dominates, leading to less work at a higher wage. C) if the substitution effect outweighs the income effect, the labor supply curve slopes upward, but if the income effect outweighs the substitution effect, the labor supply curve is backward bending. D) if the substitution effect outweighs the income effect, the labor supply curve is backward bending, but if the income effect outweighs the substitution effect, the labor supply curve slopes upward.

Figure 17-2 -Refer to Figure 17-2.Which of the panels in the diagram best represents an individual's labor supply curve? A) Panel A B) Panel B C) Panel C D) Panel D

Figure 17-2 -Refer to Figure 17-2.Which of the following statements is true? A) Panel B correctly describes a situation in which the income effect dominates the substitution effect at low wages (segment i) and again at very high wages (segment iii). B) Panel B incorrectly describes a situation in which the income effect dominates the substitution effect at low wages (segment i) and a situation in which the substitution effect dominates the income effect at very high wages (segment iii). C) Panel B incorrectly describes a situation in which the income effect dominates the substitution effect at low wages (segment i). D) Panel B incorrectly describes a situation in which the income effect dominates the substitution effect at very high wages (segment iii)

Figure 17-2 -Refer to Figure 17-2.Panel D is appropriate when used to represent A) the quantity of labor demanded by an input price taker. B) the labor supply curve facing an input price taker. C) the quantity of labor supplied by someone working a fixed number of hours. D) the highly-skilled labor market supply curve.

Figure 17-2 -Refer to Figure 17-2.In Panel A,at low wages (segment i), A) the substitution effect outweighs the income effect. B) the income effect outweighs the substitution effect. C) the substitution effect offsets the income effect. D) labor suppliers demand more leisure as wages increase.

Figure 17-2 -Refer to Figure 17-2.In Panel A,at high wages (segment iii), A) the price of leisure is rising relative to the price of labor. B) the price of leisure is falling relative to the price of labor. C) laborers work more as wages increase. D) labor suppliers take more leisure as wages increase.

Figure 17-3 -Refer to Figure 17-3.Which of the following is true if the wage rate increases from W1 to W2? A) The income effect is larger than the substitution effect. B) The substitution effect is larger than the income effect. C) The income effect and the substitution effect are equal. D) The supply curve is unit-elastic.

Figure 17-3 -Refer to Figure 17-3.Which of the following is true at W0? A) The income effect is larger than the substitution effect. B) The substitution effect is larger than the income effect. C) The income effect and the substitution effect are equal. D) The supply curve is positively sloped.

If the market wage rate increases,a firm's labor demand curve does not shift but the labor supply curve shifts to the right.

If the substitution effect of a wage increase dominates the income effect,the labor supply curve has a positive slope.

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

An increase in wages raises the opportunity cost of leisure and leads to an increase in the quantity supplied of labor.

What is the substitution effect of a wage increase? What is the income effect of a wage increase? Under what conditions will a worker's labor supply curve become downward sloping?

Serafina was earning $75 per hour and working 50 hours per week.Serafina's wage rose to $90 per hour,and as a result,she now works 60 hours per week.What can you conclude from this information about the income effect and the substitution effect of a wage change for Serafina?

Suppose that Hawaii legalizes casino gambling.By imposing a tax on casino revenues,the state government is able to eliminate the state income tax on wages.What is likely to be the effect on the labor supply curve in Hawaii?

The equilibrium wage and quantity of labor in the market for skilled workers is determined by A) the strength of labor unions. B) the monopsony power of firms. C) the demand and supply of labor. D) the market value created by the output of these skilled workers.

What happens to the equilibrium wage and quantity of labor if output price rises? A) The equilibrium wage and the equilibrium quantity of labor rise. B) The equilibrium wage and the equilibrium quantity of labor fall. C) The equilibrium wage falls and the equilibrium quantity of labor rises. D) The equilibrium wage rises and the equilibrium quantity of labor falls.

Consider the market for opticians.What is likely to happen to the equilibrium wage and quantity of opticians if more and more people turn to laser eye surgery instead of wearing glasses or contact lens? A) The equilibrium wage and the equilibrium quantity of opticians rise. B) The equilibrium wage and the equilibrium quantity of opticians fall. C) The equilibrium wage rises and the equilibrium quantity of opticians falls. D) The equilibrium quantity falls and the equilibrium wage of opticians rises.

Suppose the government grants child care subsidies to mothers entering the labor force.What is likely to happen to the equilibrium wage and quantity of labor? A) The equilibrium wage and the equilibrium quantity of labor rise. B) The equilibrium wage and the equilibrium quantity of labor fall. C) The equilibrium wage falls and the equilibrium quantity of labor rises. D) The equilibrium wage rises and the equilibrium quantity of labor falls.

Consider the market for pilots.What is likely to happen to the equilibrium wage and quantity of pilots if the government enforces a lower mandatory retirement age,say from age 65 to age 62? A) The equilibrium wage and the equilibrium quantity of pilots rise. B) The equilibrium wage and the equilibrium quantity of pilots fall. C) The equilibrium wage falls and the equilibrium quantity of pilots rises. D) The equilibrium wage rises and the equilibrium quantity of pilots falls.

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 enroll in this field. What is likely to happen to the equilibrium wage and quantity of radiologists following these two events? 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.

Suppose the following two events occur in the market for elementary school teachers: a.Overcrowded schools and education budget cuts have discouraged young college students from pursuing careers in teaching. B)With an increasing birth rate,the number of children entering the elementary school system is expected to increase significantly over the next ten years. What is likely to happen to the equilibrium wage and quantity of teachers as a result of these two events? A) The equilibrium quantity and the equilibrium wage of elementary school teachers fall. B) The equilibrium wage rises and the effect on the equilibrium quantity of elementary school teachers is indeterminate. C) The equilibrium quantity falls and the effect on the equilibrium wage of elementary school teachers is indeterminate. D) The equilibrium quantity falls and the equilibrium wage of elementary school teachers rises.

Consider this quote from an article in the Wall Street Journal: "The stock of educated workers isn't increasing fast enough to keep up with rising demand........Employers are paying the typical four-year college graduate [without graduate school] 75% more than they pay high-school grads.Twenty-five years ago,they were paying 40% more.Employers insist on ever better-educated,skilled workers." Source: David Wessel,"Lack of Well-Educated Workers Has Lots of Roots,No Quick Fix",Wall Street Journal,April 19,2007,Page A2. Which of the following best explains the rapid increase in the wage differential between college graduates and high school graduates? A) The demand for college educated workers shifted to the right while the supply of college educated workers shifted to the left. B) The supply of high-school educated workers shifted to the right faster than the demand for college educated workers shifted to the right. C) The demand for college educated workers shifted to the right faster than the supply of college educated workers shifted to the right. D) The demand for high-school educated workers shifted to the left faster than the supply of college educated workers shifted to the right.

According to the signaling hypothesis, A) signaling about job openings occurs in help wanted classified ads. B) a college diploma signals to employers that a person has certain desirable characteristics. C) a slowdown in output signals to companies the need to hire more labor. D) a high unemployment rate is a signal to the government to take some policy action.

Consider the following statements about the signaling hypothesis of education: a.The signaling hypothesis of education is based on the idea that college graduates are more productive than non-college graduates. B)The signaling hypothesis of education suggests that firms rely on human capital requirements to ensure worker quality. C)Employers rely on certain signals,such as a college diploma,to gauge a potential employee's abilities because it could lower the cost of acquiring information about the person that is not easily observed. Which of the statements above is true about the signaling hypothesis of education? A) a, b, and c B) a and b only C) b and c only D) a and c only

The success of Walt Disney's animated film The Lion King in 1994,increased production of animated films,increasing the demand for animators much faster than the supply of animators was increasing.As a result,in the market for animators,the equilibrium wage fell and the equilibrium quantity increased.

Since Poland joined the European Union in 2004,many young and educated Poles have emigrated to the United Kingdom.As a result,the labor supply curve in the United Kingdom shifts to the right and the equilibrium wage rises.

The signaling hypothesis of education states that education is a costly activity that enhances a worker's productivity.

If the labor demand curve shifts to the right and the labor supply curve remains unchanged,what will happen to the equilibrium wage and the equilibrium level of employment? Illustrate your answer with a graph.

If the labor supply curve shifts to the left and the labor demand curve remains unchanged,what will happen to the equilibrium wage and the equilibrium level of employment? Illustrate your answer with a graph.

Consider the market for blackjack dealers in Las Vegas.In each of the following cases,explain what happens to the equilibrium wage rate and the quantity of blackjack dealers hired. a.Three new large resort casinos open in Las Vegas. b.Fewer students are attending classes to learn to become blackjack dealers. c.Traditionally,blackjack dealing is a field that attracts foreign workers.However,changes in immigration laws have made it more difficult for foreign workers to come to Las Vegas to obtain jobs.The demand for blackjack dealers,however,does not change. d.Advances in technology have increased the popularity of electronic blackjack machines and decreased the popularity of live table games which require the use of a dealer.

What is the signaling hypothesis of education?

Painters who paint water towers earn higher wages relative to painters who paint houses because A) the demand for tower painters is greater than the demand for residential painters. B) painting water towers is more risky than painting houses. C) the tower painters' union is probably more powerful than the house painters' union. D) the supply of water tower painters exceeds the supply of house painters.

Wage differentials between occupations can be explained by all of the following except A) the fact that some occupations require higher levels of human capital than others. B) the fact that some occupations are more desirable than others. C) the market power of different employers. D) the relative differences between demand and supply in various occupations

A study by Price Fishback and Shawn Kantor of the University of Arizona shows that after the passage of workers' compensation laws,wages received by workers in the coal and lumber industries fell. Source: Price V.Fishback and Shawn Everett Kantor,"Did Workers Pay for the Passage of Workers' Compensation Laws?" Quarterly Journal of Economics,Vol.100,No.3,August 1995,pp.713-742. Which of the following could explain why passage of workers' compensation laws led to a fall in wages in some industries? A) The passage of the workers' compensation laws made it more expensive for firms to employ workers, thus reducing the demand for workers. B) The passage of the workers' compensation laws allowed employers in hazardous industries to reduce compensating differentials which, in turn, reduce wages. C) Employers reduced wages to partially offset the cost of having to purchase insurance that would compensate workers for injuries suffered on the job. D) The supply of labor in these hazardous industries increased following the passage of the workers' compensation laws because jobs in these industries now pose less risk.

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) The supply of star athletes has decreased. B) The supply of star athletes has increased due to college 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.

Which of the following explains why talented major league baseball players command much higher salaries than neurosurgeons? A) because the total value of baseball games is much higher than the total value of neurosurgery B) because it takes far more skill and training to be a major league baseball player than to be a neurosurgeon C) because the supply of talented major league baseball players is relatively low compared to the supply of neurosurgeons. Therefore, major league baseball players exert far more market power than neurosurgeon. D) because the supply of talented major league baseball players is low relative to its demand compared to the supply of neurosurgeons. Therefore, adding another player yields far greater marginal benefit than adding another neurosurgeon.

There are 345 Division 1-A college basketball programs.Based on this information,the labor supply curve for Division 1-A head basketball coaches is A) upward sloping. B) downward sloping. C) horizontal. D) vertical.

There are 345 Division 1-A college basketball programs.As the value of a Division 1-A basketball team increases,the equilibrium wage (salary)paid to head coaches ________ and the equilibrium quantity of head coaching positions ________. A) increases; increases B) increases; remains the same. C) increases; decreases D) remains the same; decreases

Compensating differentials are A) non-monetary benefits from being employed, such as health-care benefits. B) wages paid to workers where the supply of labor is great relative to demand. C) higher wages that compensate workers for unpleasant aspects of a job. D) higher wages that compensate the more experienced workers in a field.

Which of the following is an example of a compensating wage differential? A) Nurse anesthetists are paid less than anesthesiologists (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.

If national laws protecting the health and safety of workers completely eliminate any and all risk,then A) workers in risky occupations become better off. B) compensating wage differentials disappear and workers in risky occupations may be no better off. C) compensating differentials would grow because workers could not be compensated by being given lower risk jobs. D) more people would be employed.

If workers in nuclear power plants underestimate the true risk of their jobs, A) employers will pay compensating differential to compensate employees fully for the risk they have assumed. B) safety legislation will not make workers better off. C) the wages of these workers will not be high enough to compensate them fully for the risk they have assumed. D) the supply of workers in this occupation will exceed demand.

In the United States,about ________ of the population is covered by private health insurance,most of which is provided by employers. A) one-fourth B) one-half C) two-thirds D) three-fourths

If labor markets determine equilibrium compensation,a reduction in employer contributions for health insurance should A) lead to an offsetting increase in wages. B) increase the supply of labor. C) decrease total worker compensation. D) decrease the demand for labor.

Economic discrimination takes place when an employer A) pays workers the lowest wage possible. B) pays workers different wages on the basis of some arbitrary characteristics of workers that are irrelevant to the job performed. C) pays lower wages to workers who are not as productive as other workers. D) pays workers compensating wage differentials.

Wage differences among workers of different races and gender could be due to all of the following except A) differences in preferences for jobs. B) differences in work experience. C) differences in education. D) labor unions.

Women typically earn less than men,even in the same occupation.Which of the following is an explanation for this discrepancy? A) Women do not work as hard as men because of cultural influences. B) Women have, on average, less workforce experience than men of the same age. C) Women are, on average, less motivated than men and therefore tend to avoid taking on more responsibilities. D) Women tend to take riskier jobs and earn compensating wage differentials.

Worker discrimination occurs when A) workers refuse to perform risky tasks. B) workers refuse to work with persons of a different race. C) customers refuse to buy products produced by a racially diverse workforce. D) employers pay different employees different wages based on race.

Customer discrimination occurs when A) a firm pays workers different wages based on irrelevant factors. B) customers refuse to buy products produced by a racially diverse workforce. C) customers refuse to buy products they believe to be of poor quality. D) workers refuse to serve customers of a different race.

Which of the following is a reason why it is difficult to estimate the extent of economic discrimination in the labor market? A) Employers who discriminate are likely to do so in overt ways such as awarding some workers with benefits-in-kind. B) Ultimately, employers who discriminate cannot remain profitable. C) Employers who discriminate pay an economic penalty. D) Differences in wages can be attributed to many other factors as well, such as differences in productivity and preferences.

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

Consider the following pieces of information: a.According to Bonnie Reyes,president and chief operating officer of Better Investing,a national organization of investment clubs,women have traditionally made up about 60 percent of the membership of investment clubs.By contrast,less than a third of team-managed mutual funds on Wall Street have even one woman on the management team. B)Research conducted by professors E.Brooke Harrington and Max Planck concluded that mixed investment clubs,on average,outperformed the typical single-sex investment club. C)The lack of gender diversity in Wall Street could be influenced by its reputation,according to professor Harrington,"for being inhospitable to women." Source: Michael Hulbert,"Strategies: At some Funds,a Gender Communications Gap",The New York Times,October 7,2007,Sunday Money,page 5. The information presented is an example of A) economic discrimination. B) a negative feedback loop. C) marginal productivity theory. D) the absence of comparable worth.

The primary purpose of labor unions is to A) ensure that workers receive adequate safety training. B) ensure that all members earn identical incomes. C) negotiate with employers about wages and working conditions. D) endorse candidates and donate money to them.

Comparable worth legislation A) will eliminate the earnings gap between men and women. B) mandate that employers pay the same wages to workers, regardless of their gender, for jobs that have comparable worth. C) mandate that potential employers demonstrate that they are worth the wages they expect to earn. D) guide markets toward the economically efficient wage.

Refer to Scenario 17-1.Following the passage of comparable worth legislation,Unity College responds by placing salaries for all assistant professors at $80,000.Which of the following is the result of the legislation? A) The supply of English professors increases; the market for business professors is not affected. B) The demand for English professors decreases; the market for business professors is not affected. C) There will be a surplus in the market for English professors and a shortage in the market for business professors. D) There will be a surplus in the market for English professors and the market for business professors will not be affected.

Refer to Scenario 17-1.Following the passage of comparable worth legislation,Unity College responds by placing salaries at $65,000.Which of the following is the result of the legislation? A) The supply of English professors increases and the supply of business professors decreases. B) The demand for English professors decreases and the demand for business professors increases. C) There will be a surplus in the market for English professors and a shortage in the market for business professors. D) There will be a surplus in the market for English professors and the market for business professors will not be affected.

In a study conducted by Marianne Bertrand and Sendhil Mullianthan,identical resumes were sent in response to help wanted ads in newspapers,with half of the resumes assigned an African-American-sounding name and half assigned a white-sounding name.The study found that A) employers were equally likely to interview workers with white-sounding names and with African-American-sounding names. B) employers were 50 percent more likely to interview workers with African-American-sounding names. C) employers were 50 percent more likely to interview workers with white-sounding names. D) no employers chose to interview workers with African-American-sounding names.

In labor economics,the term "customer discrimination" refers to a situation where customers are charged different prices for services rendered by a firm.

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

While labor unions tend to negotiate above-equilibrium wage rates for their members,they also tend to reduce the quantity of labor hired.

What is a compensating differential?

Why do professional basketball players earn more than police officers? Illustrate this situation graphically.

Figure 17-4 -Refer to Figure 17-4 to answer the following questions. a.What is the equilibrium quantity of firefighters hired,and what is the equilibrium wage? b.What is the equilibrium quantity of paralegals hired,and what is the equilibrium wage? c.Explain why firefighters might earn a higher weekly wage than paralegals. d.Suppose that comparable worth legislation is passed,and the government requires that firefighters and paralegals be paid the same wage,$800 per week.Now how many firefighters will be hired and how many paralegals will be hired?

Personnel economics is A) the study of the factors that determine wage rates. B) the study of how workers are affected by tax law changes. C) the application of economic analyses to human resource issues. D) the application of economic analysis to the hiring decision.

A successful compensation scheme A) must pay workers with comparable skills a comparable wage. B) must induce effort from workers and ensure that both employer and employees benefit. C) must enable workers to enjoy a certain standard of living and must enable employers to earn a normal rate of return. D) must allow employees to participate in a firm's profits.

Which of the following is a reason why some firms do not use commission pay? A) It gives workers incentive to produce more. B) It increases firm profits. C) It is difficult to measure the output and attribute output to a particular worker. D) The best workers stay and less productive workers leave.

Which of the following statements about commission systems of compensation is false? A) They increase the risk to workers because sometimes output declines for reasons not connected to the worker's effort. B) During sluggish periods, an employer's payroll expenses will decline along with sales. C) If workers are paid on the basis of the number of units produced, they may become less concerned about quality. D) The lack of income stability will induce the more productive workers to leave in search of more secure employment.

Despite evidence that companies will find it more profitable to use a commission system of compensation rather than a salary system,many companies continue to pay their workers salaries.Which of the following is one reason why firms choose a salary system? A) Most business owners and managers are not trained economists; therefore, they are unaware of the research that shows a commission system is more profitable than a salary system. B) Firms often use salary systems to overcome their principal-agent problems. C) Firms that have salary systems do not have to use compensating differentials to attract employees to do hazardous jobs. D) Many workers dislike risk and prefer to be paid a salary rather than to be paid by commission.

Figure 17-5 Figure 17-5 shows two different compensation schemes for the Safelite Glass Corporation, an installer of auto glass windshields. Under Scheme I, the firm pays a consistent wage of $80 per day based on an 8-hour workday. Qmin represents the cut-off point under the hourly-wage system: if a worker installed fewer than Qmin windshields, the worker got fired. Scheme II represents a piece-rate scheme with an earnings floor: no worker would get less than $80 per day (for an 8-hour workday) and would have to produce at least Qmin. For any output level beyond Q* the worker earned an additional $20 for each unit produced. -Refer to Figure 17-5.Under Scheme I, A) workers compete with each other to see who can produce beyond Qmin in the shortest possible time. B) workers have no incentive to produce beyond Qmin. C) workers signal their productivity to the firm by consistently producing above Qmin. D) the incentive to increase productivity depends on where Qmin is set; if it is at a very high level, then workers will rise to the challenge for fear of losing their jobs.

Figure 17-5 Figure 17-5 shows two different compensation schemes for the Safelite Glass Corporation, an installer of auto glass windshields. Under Scheme I, the firm pays a consistent wage of $80 per day based on an 8-hour workday. Qmin represents the cut-off point under the hourly-wage system: if a worker installed fewer than Qmin windshields, the worker got fired. Scheme II represents a piece-rate scheme with an earnings floor: no worker would get less than $80 per day (for an 8-hour workday) and would have to produce at least Qmin. For any output level beyond Q* the worker earned an additional $20 for each unit produced. -Refer to Figure 17-5.Which of the following statements about Scheme II is false? A) It is likely to draw highly productive workers who see the opportunity to increase their wages. B) It could discourage less productive workers and induce them to leave the firm. C) It allows workers to increase their daily wage without penalizing those who are content with their daily wage. D) It is more risky for senior employees.

Figure 17-5 Figure 17-5 shows two different compensation schemes for the Safelite Glass Corporation, an installer of auto glass windshields. Under Scheme I, the firm pays a consistent wage of $80 per day based on an 8-hour workday. Qmin represents the cut-off point under the hourly-wage system: if a worker installed fewer than Qmin windshields, the worker got fired. Scheme II represents a piece-rate scheme with an earnings floor: no worker would get less than $80 per day (for an 8-hour workday) and would have to produce at least Qmin. For any output level beyond Q* the worker earned an additional $20 for each unit produced. -Refer to Figure 17-5.Suppose Qmin = 2 windshields and Q*=5 windshields.Under Scheme II,a worker has to install Q* windshields before she earns an additional $20 per windshield installed.What is a potential problem with this scheme? A) Workers might be more concerned with increasing output beyond Q* and less concerned with the quality of their work. B) Any increase in output between Qmin and Q* benefits the employer only. C) It violates labor laws because workers are not compensated for output between Qmin and Q*. D) Workers have no incentive to produce output to between Qmin and Q*.

A commission system of compensation reduces the risk to workers during seasonal periods when business is sluggish.

When workers are paid on a piece-rate basis,an employer must be able to easily measure each worker's output.

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.

What is personnel economics?

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

If commission or piece-rate systems of compensating workers have important advantages for firms,why don't more firms use them?

If a firm is the sole employer of a factor of production,it is known as A) a monopoly. B) a competitor. C) a monopsony. D) an economically discriminating firm.

The marginal revenue product of capital is A) the cost to the firm of renting an additional unit of capital. B) the change in the firm's revenue as a result of employing one more unit of capital, such as a machine. C) the economic rent received by hiring an additional unit of capital. D) the revenue generated by substituting capital for labor in the production process.

Which of the following statements regarding equilibrium in the markets for capital and for a natural resource used in producing a good is true? A) The marginal revenue product of capital will equal the marginal revenue product of the natural resource. B) The rental price of capital will equal the price of the natural resource. C) The marginal product of capital will equal the rental price of capital and the marginal product of the natural resource will equal the price of the natural resource. D) The marginal revenue product of capital will equal the rental price of capital and the marginal revenue product of the natural resource will equal the price of the natural resource.

The Buda Agri Corporation is the sole employer in rural Hungary.In the labor market,Buda Agri is a A) monopolistic competitor. B) monopsony. C) monopoly. D) perfect competitor.

Economic rent is defined as 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.

The town of Saddle Peak has a fixed supply of mountain view lots.In this case,the price per square foot of mountain view lots is A) determined only by supply. B) determined only by demand. C) set by government officials of Saddle Peak. D) negotiated by environmental groups and property developers.

According to the marginal productivity theory of income, A) the greater the quantity of resources owned by an individual, the greater his incentive to increase productivity and his income. B) the average income received by an individual who supplies resources is influenced by the resources owner's marginal productivity. C) the income received by an individual who supplies labor services equals the incremental benefit generated to the firm by that individual's labor. D) the income received by an individual who supplies labor services equals the profit generated to the firm by that individual's labor.

The marginal productivity theory of income states that a person's total income is determined by A) the amount and productivity of factors of production the individual owns. B) how much the individual works. C) how profitable the firm the individual works for is. D) how much the individual has inherited.

The supply curve of a uniquely talented actor or superstar athlete will be perfectly inelastic.

The market price of a factor of production that is in fixed is determined only by demand.

A monopsony is a firm which is the sole producer of a product.

What is a monopsony?

What is the marginal productivity theory of income distribution?

Table 17-4 -Refer to Table 17-4.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-maximizing number of machines for Dante to rent.Explain why renting this number of machines is profit maximizing. b.Draw Dante's demand curve for capital.