Question 1

If the substitution effect dominates the income effect, then an increase in the wage rate will increase the quantity of labor supplied by an individual.

Accepted Answer

A) True 
 B)False

Question 2

People who can earn higher market wages, other things constant, will

Accepted Answer

A) provide more labor to nonmarket work 
B) be more inclined to supply their labor to market work than to nonmarket work 
C) be more inclined to supply their labor to nonmarket work than to market work 
D) provide more labor to nonmarket work even if the market can provide the services more cheaply 
E) provide less labor to market work and more labor to nonmarket work 
A) provide more labor to nonmarket work 
B) be more inclined to supply their labor to market work than to nonmarket work 
C) be more inclined to supply their labor to nonmarket work than to market work 
D) provide more labor to nonmarket work even if the market can provide the services more cheaply 
E) provide less labor to market work and more labor to nonmarket work

Question 3

Other things equal, the supply of labor will be higher to a job that

Accepted Answer

A) requires a supervisor to closely monitor employee performance 
B) provides few opportunities for training 
C) has a starting time of midnight 
D) requires advanced skills or education 
E) has more amenities 
A) requires a supervisor to closely monitor employee performance 
B) provides few opportunities for training 
C) has a starting time of midnight 
D) requires advanced skills or education 
E) has more amenities

Question 4

If an industrial union is able to negotiate a wage above the competitive market-clearing wage, employment in the industry will increase.

Accepted Answer

A) True 
 B)False

Question 5

It is sometimes claimed that garbage collectors are paid more than elementary school teachers.If this is true, one reason might be

Accepted Answer

A) the difference in working conditions 
B) that school teachers are usually women 
C) that the supply of teachers is small 
D) that the demand for teachers is small 
E) that the market does not value teachers 
A) the difference in working conditions 
B) that school teachers are usually women 
C) that the supply of teachers is small 
D) that the demand for teachers is small 
E) that the market does not value teachers

Question 6

College students often spend summers in internships that pay little or no income because internships provide benefits in the form of higher future incomes.

Accepted Answer

A) True 
 B)False

Question 7

Collective bargaining is the process by which a labor union and a firm negotiate an employment contract.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following could explain an increase in demand for labor?

Accepted Answer

A) additional training that increases the productivity of each unit of labor in this market 
B) an increase in the amount of risk associated with this job 
C) a decrease in the amount of risk associated with this job 
D) an improvement in the working conditions associated with this job 
E) a decline in the working conditions associated with this job 
A) additional training that increases the productivity of each unit of labor in this market 
B) an increase in the amount of risk associated with this job 
C) a decrease in the amount of risk associated with this job 
D) an improvement in the working conditions associated with this job 
E) a decline in the working conditions associated with this job

Question 9

A newly acquired microwave oven and a food processor will increase Chuck's productivity in the kitchen.Accordingly, he will

Accepted Answer

A) cook more and eat out less 
B) cook less and eat out more 
C) buy more ready-to-eat foods 
D) be more likely to hire a cook 
E) increase the quality of what he cooks but may or may not cook more 
A) cook more and eat out less 
B) cook less and eat out more 
C) buy more ready-to-eat foods 
D) be more likely to hire a cook 
E) increase the quality of what he cooks but may or may not cook more

Question 10

If a union is able to restrict the supply of a non-union-made substitute product,

Accepted Answer

A) wages will increase but employment will decrease 
B) wages will increase and employment will increase 
C) wages will decrease but employment will increase 
D) wages will decrease and employment will decrease 
E) the demand for non-union labor will increase 
A) wages will increase but employment will decrease 
B) wages will increase and employment will increase 
C) wages will decrease but employment will increase 
D) wages will decrease and employment will decrease 
E) the demand for non-union labor will increase

Question 11

Exhibit 12-6   Assume an industrial union is formed and establishes the wage rate at $4 in Exhibit 12-6.The reason the wage rate will not fall to the competitive equilibrium level is that

Accepted Answer

A) all workers are wealthier in disequilibrium 
B) nonunion workers are poorer than union workers 
C) there is excess demand for labor at equilibrium 
D) there is excess supply of labor at equilibrium 
E) wages are determined by collective negotiation, not individual negotiation 
A) all workers are wealthier in disequilibrium 
B) nonunion workers are poorer than union workers 
C) there is excess demand for labor at equilibrium 
D) there is excess supply of labor at equilibrium 
E) wages are determined by collective negotiation, not individual negotiation

Question 12

Exhibit 12-10   In Exhibit 12-10, which of the following is true between points a and b?

Accepted Answer

A) The income effect dominates the substitution effect. 
B) The substitution effect dominates the income effect. 
C) The income effect exactly offsets the substitution effect. 
D) No labor is supplied. 
E) There is no substitution effect. 
A) The income effect dominates the substitution effect. 
B) The substitution effect dominates the income effect. 
C) The income effect exactly offsets the substitution effect. 
D) No labor is supplied. 
E) There is no substitution effect.

Question 13

Exhibit 12-9   In Exhibit 12-9, the labor supply and labor demand in a unionized labor market is represented by the demand curve D0 and Supply curve S0.Which of the market equilibria is the most likely outcome of a union improving labor management relations which results in an increase in the productivity of labor?

Accepted Answer

A) a 
B) b 
C) c 
D) d 
E) either a or d 
A) a 
B) b 
C) c 
D) d 
E) either a or d

Question 14

A craft union is a union composed of all the workers at a single firm.

Accepted Answer

A) True 
 B)False

Question 15

In a labor negotiation, a mediator

Accepted Answer

A) represents the union rank-and-file members 
B) represents the management side 
C) is an impartial observer 
D) can call a strike 
E) can force both sides to agree to a contract 
A) represents the union rank-and-file members 
B) represents the management side 
C) is an impartial observer 
D) can call a strike 
E) can force both sides to agree to a contract

Question 16

People make mistakes in allocating their time

Accepted Answer

A) only when leisure time is an inferior good 
B) because expectations are not always fulfilled 
C) more often when the cost of making a mistake is high 
D) only when economists remove the assumption that individuals are rational 
E) because information is free and readily available 
A) only when leisure time is an inferior good 
B) because expectations are not always fulfilled 
C) more often when the cost of making a mistake is high 
D) only when economists remove the assumption that individuals are rational 
E) because information is free and readily available

Question 17

If two accountants have had the same education, amount of experience, and work at the same type of job for the same profit-maximizing firm, which charges its clients a uniform hourly fee,

Accepted Answer

A) they should earn the same amount of money 
B) the one whose job is riskier should be paid more 
C) the one whose job is riskier should be paid less 
D) the one who has a higher marginal product (due to ability)should be paid more 
E) the one who has a higher marginal product (due to ability)should be paid less 
A) they should earn the same amount of money 
B) the one whose job is riskier should be paid more 
C) the one whose job is riskier should be paid less 
D) the one who has a higher marginal product (due to ability)should be paid more 
E) the one who has a higher marginal product (due to ability)should be paid less

Question 18

Craft unions attempt to increase wages in their profession by

Accepted Answer

A) increasing labor demand 
B) decreasing labor demand 
C) decreasing labor supply 
D) increasing labor supply 
E) exclusive dealing contracts 
A) increasing labor demand 
B) decreasing labor demand 
C) decreasing labor supply 
D) increasing labor supply 
E) exclusive dealing contracts

Question 19

Unions can increase their wage rates by

Accepted Answer

A) all of the following 
B) decreasing the supply of labor 
C) using the threat of a strike 
D) increasing the proportion of union workers in the industry 
E) increasing the demand for the product they produce and, therefore, the demand for their labor services 
A) all of the following 
B) decreasing the supply of labor 
C) using the threat of a strike 
D) increasing the proportion of union workers in the industry 
E) increasing the demand for the product they produce and, therefore, the demand for their labor services

Question 20

In what three ways do people use their time?

Accepted Answer

A) market work, selling labor in the labor market, and leisure 
B) producing their own goods and services, nonmarket work, and market work 
C) nonwork, work, and leisure 
D) market work, nonmarket work, and leisure 
E) market work, nonwork, and leisure 
A) market work, selling labor in the labor market, and leisure 
B) producing their own goods and services, nonmarket work, and market work 
C) nonwork, work, and leisure 
D) market work, nonmarket work, and leisure 
E) market work, nonwork, and leisure

Exam 12: Labor Markets and Labor Unions

If the substitution effect dominates the income effect, then an increase in the wage rate will increase the quantity of labor supplied by an individual.

People who can earn higher market wages, other things constant, will

Other things equal, the supply of labor will be higher to a job that

If an industrial union is able to negotiate a wage above the competitive market-clearing wage, employment in the industry will increase.

It is sometimes claimed that garbage collectors are paid more than elementary school teachers.If this is true, one reason might be

College students often spend summers in internships that pay little or no income because internships provide benefits in the form of higher future incomes.

Collective bargaining is the process by which a labor union and a firm negotiate an employment contract.

Which of the following could explain an increase in demand for labor?

A newly acquired microwave oven and a food processor will increase Chuck's productivity in the kitchen.Accordingly, he will

If a union is able to restrict the supply of a non-union-made substitute product,

Exhibit 12-6 Assume an industrial union is formed and establishes the wage rate at $4 in Exhibit 12-6.The reason the wage rate will not fall to the competitive equilibrium level is that

Exhibit 12-10 In Exhibit 12-10, which of the following is true between points a and b?

A craft union is a union composed of all the workers at a single firm.

In a labor negotiation, a mediator

People make mistakes in allocating their time

If two accountants have had the same education, amount of experience, and work at the same type of job for the same profit-maximizing firm, which charges its clients a uniform hourly fee,

Craft unions attempt to increase wages in their profession by

Unions can increase their wage rates by

In what three ways do people use their time?

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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