Question 1

Tim works 51 hours per week,and his wage is $35 per hour.If his wage increases to $70 per hour:

Accepted Answer

A) the substitution effect implies that he will work less. 
B) if leisure is a normal good,the income effect implies that he will work more. 
C) if leisure is a normal good,the income effect will reinforce the substitution effect and he will work more. 
D) the substitution effect implies that he will work more. 
A) the substitution effect implies that he will work less. 
B) if leisure is a normal good,the income effect implies that he will work more. 
C) if leisure is a normal good,the income effect will reinforce the substitution effect and he will work more. 
D) the substitution effect implies that he will work more.

Question 2

When wages increase,if the substitution effect dominates,the quantity of labor supplied will increase.

Accepted Answer

A) True 
 B)False

Question 3

Which factor will NOT shift the labor supply curve?

Accepted Answer

A) a change in attitude toward work 
B) changes in a spouse's income 
C) changes in expectations about future wealth 
D) a change in the wage rate 
A) a change in attitude toward work 
B) changes in a spouse's income 
C) changes in expectations about future wealth 
D) a change in the wage rate

Question 4

Which statement is MOST likely an example of wage disparity due to differences in talent and ability?

Accepted Answer

A) The median earnings of White men are more than are the median earnings of African-Americans. 
B) Clerks at a Gap in New York City earn more than do clerks at a Gap in Topeka,Kansas. 
C) Nick Saban,the football coach at the University of Alabama,earns more than does the local high school football coach. 
D) Crab fishermen on the Bering Sea earn more than do clerks who sell goldfish at a pet store. 
A) The median earnings of White men are more than are the median earnings of African-Americans. 
B) Clerks at a Gap in New York City earn more than do clerks at a Gap in Topeka,Kansas. 
C) Nick Saban,the football coach at the University of Alabama,earns more than does the local high school football coach. 
D) Crab fishermen on the Bering Sea earn more than do clerks who sell goldfish at a pet store.

Question 5

Use the following to answer question:
Figure: The Demand for Bricklayers  
-(Figure: The Demand for Bricklayers)Use Figure: The Demand for Bricklayers.Which statement is TRUE?

Accepted Answer

A) Bricklayers should be hired whenever the value of the marginal product of bricklayers is greater than or equal to the market wage rate of bricklayers. 
B) The profit-maximizing condition for firms hiring bricklayers is where VMPLbricklayers is less than the market wage rate. 
C) The profit-maximizing condition for firms hiring bricklayers is where MPbricklayers equals the market wage rate. 
D) Bricklayers should be hired whenever the market wage rate of bricklayers is greater than the value of the marginal product of bricklayers. 
A) Bricklayers should be hired whenever the value of the marginal product of bricklayers is greater than or equal to the market wage rate of bricklayers. 
B) The profit-maximizing condition for firms hiring bricklayers is where VMPLbricklayers is less than the market wage rate. 
C) The profit-maximizing condition for firms hiring bricklayers is where MPbricklayers equals the market wage rate. 
D) Bricklayers should be hired whenever the market wage rate of bricklayers is greater than the value of the marginal product of bricklayers.

Question 6

Suppose the labor market for plumbers is in equilibrium.Which occurrence might DECREASE the wage for plumbers?

Accepted Answer

A) An economic boom increases the demand for new homes. 
B) The plumbers union establishes a rigorous certification test that is difficult for aspiring plumbers to pass. 
C) Unemployed manufacturing workers attend technical schools to learn the plumbing trade. 
D) A minimum wage is imposed in the market for plumbers. 
A) An economic boom increases the demand for new homes. 
B) The plumbers union establishes a rigorous certification test that is difficult for aspiring plumbers to pass. 
C) Unemployed manufacturing workers attend technical schools to learn the plumbing trade. 
D) A minimum wage is imposed in the market for plumbers.

Question 7

All perfectly competitive fast-food firms are hiring the profit-maximizing quantity of labor and are paying their workers $7 per hour.If the government raises the minimum wage to $8 per hour:

Accepted Answer

A) the value of the marginal product will exceed the wage,and firms will hire more workers. 
B) the value of the marginal product will be less than the wage,and firms will lay off some workers. 
C) firms will increase their prices to keep the value of the marginal product equal to the wage. 
D) firms will have to exit the industry since the value of the marginal product is always less than the wage. 
A) the value of the marginal product will exceed the wage,and firms will hire more workers. 
B) the value of the marginal product will be less than the wage,and firms will lay off some workers. 
C) firms will increase their prices to keep the value of the marginal product equal to the wage. 
D) firms will have to exit the industry since the value of the marginal product is always less than the wage.

Question 8

Which factor does NOT partially explain wage differentials?

Accepted Answer

A) different amounts of human capital 
B) compensating differentials 
C) differences in talent 
D) differences in capital 
A) different amounts of human capital 
B) compensating differentials 
C) differences in talent 
D) differences in capital

Question 9

Which factor is associated with production at a college?

Accepted Answer

A) the faculty 
B) lab concentrations to use in experiments 
C) electricity 
D) Scantron sheets 
A) the faculty 
B) lab concentrations to use in experiments 
C) electricity 
D) Scantron sheets

Question 10

Which statement is NOT true about the factor distribution of income?

Accepted Answer

A) It is the division of total income among labor,land,and capital. 
B) Labor receives the bulk of the income in the modern U.S.economy. 
C) The returns to human capital are easily measured. 
D) A part of the proprietor's income should be considered wages that the business owners pay themselves. 
A) It is the division of total income among labor,land,and capital. 
B) Labor receives the bulk of the income in the modern U.S.economy. 
C) The returns to human capital are easily measured. 
D) A part of the proprietor's income should be considered wages that the business owners pay themselves.

Question 11

Use the following to answer question:  
-(Table: Value of the Marginal Product of Labor and Demand)Use Table: Value of the Marginal Product of Labor and Demand.In the table,the total product of labor is shown for the hourly production of power cords.Assume that the market for power cords is perfectly competitive.The price of a power cord is $2,the market wage rate is $40 per hour,and 8 workers are hired.Profit can be maximized by hiring _____ worker(s).

Accepted Answer

A) 1 more 
B) 2 more 
C) 1 fewer 
D) 3 fewer 
A) 1 more 
B) 2 more 
C) 1 fewer 
D) 3 fewer

Question 12

If the demand for orange juice increases,the derived demand for orange grove workers will decrease.

Accepted Answer

A) True 
 B)False

Question 13

To maximize profits,a firm will employ workers until for the last worker employed:

Accepted Answer

A) marginal product of labor is equal to the nominal wage rate. 
B) the value of the marginal product of labor is equal to the wage rate. 
C) the value of the marginal product of labor is equal to the price per unit of output. 
D) the value of the marginal product of labor is as high as possible. 
A) marginal product of labor is equal to the nominal wage rate. 
B) the value of the marginal product of labor is equal to the wage rate. 
C) the value of the marginal product of labor is equal to the price per unit of output. 
D) the value of the marginal product of labor is as high as possible.

Question 14

A wage _____ reduces the quantity of labor supplied through the _____ effect.

Accepted Answer

A) decrease;income 
B) increase;substitution 
C) increase;income 
D) decrease;complement 
A) decrease;income 
B) increase;substitution 
C) increase;income 
D) decrease;complement

Question 15

Suppose that the government increases the child tax credit,which increases the after-tax income of families with children.How will this decision affect the amount of labor supplied by parents,assuming that leisure is a normal good?

Accepted Answer

A) Since the income and substitution effects move in the same direction,the amount of labor supplied will increase. 
B) Since the income effect will dominate the substitution effect,the amount of labor supplied will decrease. 
C) We don't know what will happen to the quantity of labor supplied,since we don't know whether the income effect or substitution effect will dominate. 
D) The labor supply curve will shift right,so the quantity of labor will also increase. 
A) Since the income and substitution effects move in the same direction,the amount of labor supplied will increase. 
B) Since the income effect will dominate the substitution effect,the amount of labor supplied will decrease. 
C) We don't know what will happen to the quantity of labor supplied,since we don't know whether the income effect or substitution effect will dominate. 
D) The labor supply curve will shift right,so the quantity of labor will also increase.

Question 16

Employers can sometimes organize to pay lower wages when:

Accepted Answer

A) efficiency wages are used to drive down morale and break up a labor union. 
B) health maintenance organizations (HMOs)organize to get groups of doctors to work together at lower wages than they would earn on their own. 
C) labor unions are not allowed to engage in collective bargaining. 
D) corporations force the minimum wage down. 
A) efficiency wages are used to drive down morale and break up a labor union. 
B) health maintenance organizations (HMOs)organize to get groups of doctors to work together at lower wages than they would earn on their own. 
C) labor unions are not allowed to engage in collective bargaining. 
D) corporations force the minimum wage down.

Question 17

Over the past 30 years,the premium for workers with advanced degrees has decreased.

Accepted Answer

A) True 
 B)False

Question 18

In the U.S.labor market,Hispanic men have the highest median earnings of any demographic group.

Accepted Answer

A) True 
 B)False

Question 19

If the wage rate rises,firms will find that:

Accepted Answer

A) their labor demand curve shifts leftward. 
B) their labor demand curve shifts rightward. 
C) they move upward and to the left along the labor demand curve. 
D) they move downward and to the right along the labor demand curve. 
A) their labor demand curve shifts leftward. 
B) their labor demand curve shifts rightward. 
C) they move upward and to the left along the labor demand curve. 
D) they move downward and to the right along the labor demand curve.

Question 20

In terms of labor supply,the substitution effect of a higher wage causes a(n):

Accepted Answer

A) increase in leisure time. 
B) decrease in the quantity of labor supplied. 
C) substitution of work for leisure. 
D) reduction of work time to zero. 
A) increase in leisure time. 
B) decrease in the quantity of labor supplied. 
C) substitution of work for leisure. 
D) reduction of work time to zero.

Exam 19: Factor Markets and the Distribution of Income

Tim works 51 hours per week,and his wage is $35 per hour.If his wage increases to $70 per hour:

When wages increase,if the substitution effect dominates,the quantity of labor supplied will increase.

Which factor will NOT shift the labor supply curve?

Which statement is MOST likely an example of wage disparity due to differences in talent and ability?

Use the following to answer question: Figure: The Demand for Bricklayers -(Figure: The Demand for Bricklayers)Use Figure: The Demand for Bricklayers.Which statement is TRUE?

Suppose the labor market for plumbers is in equilibrium.Which occurrence might DECREASE the wage for plumbers?

All perfectly competitive fast-food firms are hiring the profit-maximizing quantity of labor and are paying their workers $7 per hour.If the government raises the minimum wage to $8 per hour:

Which factor does NOT partially explain wage differentials?

Which factor is associated with production at a college?

Which statement is NOT true about the factor distribution of income?

If the demand for orange juice increases,the derived demand for orange grove workers will decrease.

To maximize profits,a firm will employ workers until for the last worker employed:

A wage _____ reduces the quantity of labor supplied through the _____ effect.

Suppose that the government increases the child tax credit,which increases the after-tax income of families with children.How will this decision affect the amount of labor supplied by parents,assuming that leisure is a normal good?

Employers can sometimes organize to pay lower wages when:

Over the past 30 years,the premium for workers with advanced degrees has decreased.

In the U.S.labor market,Hispanic men have the highest median earnings of any demographic group.

If the wage rate rises,firms will find that:

In terms of labor supply,the substitution effect of a higher wage causes a(n):

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

A wage _ reduces the quantity of labor supplied through the _ effect.