Question 1

Draw a labor supply curve and label it to indicate where the substitution effect dominates and where the income effect dominates.

Accepted Answer

Refer to the graph below. Section AB is

Question 2

An increase in a firm's product price causes

Accepted Answer

A) an increase in the quantity of labor demanded by the firm. 
B) a decrease in the quantity of labor demanded by the firm. 
C) an increase in the demand for labor by the firm. 
D) a decrease in the demand for labor by the firm 
E) no change in the demand for labor by the firm. 
A) an increase in the quantity of labor demanded by the firm. 
B) a decrease in the quantity of labor demanded by the firm. 
C) an increase in the demand for labor by the firm. 
D) a decrease in the demand for labor by the firm 
E) no change in the demand for labor by the firm.

Question 3

Exhibit 13-2  
-Refer to Exhibit 13-2. If the wage per day is $55 and the firm is employing 6 units of labor,

Accepted Answer

A) it is uncertain what the firm should do given the information available. 
B) the firm should increase its hiring of labor. 
C) the firm should decrease the amount of labor it hires. 
D) the firm is profit-maximizing. 
E) the firm is earning negative profits. 
A) it is uncertain what the firm should do given the information available. 
B) the firm should increase its hiring of labor. 
C) the firm should decrease the amount of labor it hires. 
D) the firm is profit-maximizing. 
E) the firm is earning negative profits.

Question 4

The real wage is

Accepted Answer

A) the manner in which productivity is measured. 
B) always less than the nominal wage. 
C) the amount of money one actually receives after taxes. 
D) the wage people are paid adjusted for interest rates. 
E) the wage people are paid adjusted for inflation. 
A) the manner in which productivity is measured. 
B) always less than the nominal wage. 
C) the amount of money one actually receives after taxes. 
D) the wage people are paid adjusted for interest rates. 
E) the wage people are paid adjusted for inflation.

Question 5

The income and substitution effects of a change in the wage rate always works in opposite directions.

Accepted Answer

A) True 
 B)False

Question 6

Piece-rate wages are most commonly used when

Accepted Answer

A) it is difficult to monitor workers. 
B) there is no minimum wage on the law books. 
C) firms want to break unions. 
D) firm owners are unethical. 
E) it is difficult to measure worker output. 
A) it is difficult to monitor workers. 
B) there is no minimum wage on the law books. 
C) firms want to break unions. 
D) firm owners are unethical. 
E) it is difficult to measure worker output.

Question 7

Give two explanations why college graduates earn higher wages than those who do not graduate from college.

Accepted Answer

One ratinal is the human capital ratinal

Question 8

The statement "you couldn't pay me all the money in the world to do that job" reflects attitudes that lead to

Accepted Answer

A) compensating wage differentials. 
B) diminishing marginal product. 
C) a backward-bending labor demand curve. 
D) a backward-bending labor supply curve. 
E) lack of rationality. 
A) compensating wage differentials. 
B) diminishing marginal product. 
C) a backward-bending labor demand curve. 
D) a backward-bending labor supply curve. 
E) lack of rationality.

Question 9

Which of the following is true of a standard supply and demand diagram for the labor market?

Accepted Answer

A) Price is displayed on the vertical axis and labor quantity is displayed on the horizontal axis. 
B) Price is displayed on the horizontal axis and labor quantity is displayed on the vertical axis. 
C) Wage is displayed on the vertical axis and labor quantity is displayed on the horizontal axis. 
D) Wage is displayed on the horizontal axis and labor quantity is displayed on the vertical axis. 
E) Price is displayed on the vertical axis and wage is displayed on the horizontal axis. 
A) Price is displayed on the vertical axis and labor quantity is displayed on the horizontal axis. 
B) Price is displayed on the horizontal axis and labor quantity is displayed on the vertical axis. 
C) Wage is displayed on the vertical axis and labor quantity is displayed on the horizontal axis. 
D) Wage is displayed on the horizontal axis and labor quantity is displayed on the vertical axis. 
E) Price is displayed on the vertical axis and wage is displayed on the horizontal axis.

Question 10

In the United States, an increase in labor productivity growth since the mid-1990s has been accompanied by a(n)

Accepted Answer

A) drop in real wages. 
B) increase in prices. 
C) increase in the inflation rate. 
D) increase in the growth rate of real wages. 
E) recession. 
A) drop in real wages. 
B) increase in prices. 
C) increase in the inflation rate. 
D) increase in the growth rate of real wages. 
E) recession.

Question 11

The Teamsters' (truck drivers) union is a(n) ____ union.

Accepted Answer

A) craft 
B) service 
C) social 
D) guild 
E) industrial 
A) craft 
B) service 
C) social 
D) guild 
E) industrial

Question 12

The demand for labor is derived from the

Accepted Answer

A) productivity of labor. 
B) supply of the product it produces. 
C) demand for the product it produces. 
D) supply of labor. 
E) demand for the product it produces and the productivity of labor. 
A) productivity of labor. 
B) supply of the product it produces. 
C) demand for the product it produces. 
D) supply of labor. 
E) demand for the product it produces and the productivity of labor.

Question 13

Studies have not shown definitively that the minimum wage causes unemployment.

Accepted Answer

A) True 
 B)False

Question 14

The substitution effect in an individual's labor/leisure choice is that

Accepted Answer

A) lower wages cause firms to operate less often. 
B) a higher wage makes work less necessary, so less of it is done. 
C) a higher wage makes work a more attractive alternative, so more work results. 
D) work and leisure can be substituted for one another because they are generally mutually exclusive activities. 
E) a lower wage makes leisure less attractive as an alternative, and less leisure is consumed. 
A) lower wages cause firms to operate less often. 
B) a higher wage makes work less necessary, so less of it is done. 
C) a higher wage makes work a more attractive alternative, so more work results. 
D) work and leisure can be substituted for one another because they are generally mutually exclusive activities. 
E) a lower wage makes leisure less attractive as an alternative, and less leisure is consumed.

Question 15

Compensation

Accepted Answer

A) is the term used for time off earned by working extra hours. 
B) is the pay workers receive for being injured on the job. 
C) refers to lawsuit settlements. 
D) is synonymous with the term wage in the text. 
E) excludes fringe benefits. 
A) is the term used for time off earned by working extra hours. 
B) is the pay workers receive for being injured on the job. 
C) refers to lawsuit settlements. 
D) is synonymous with the term wage in the text. 
E) excludes fringe benefits.

Question 16

The reason that economists are concerned with looking at the real wage is that

Accepted Answer

A) the real wage shows absolute buying power and allows economists to compare U.S.pay to that of other countries. 
B) because of inflation, the nominal wage often understates the actual rise in purchasing power. 
C) the real wage simplifies the gathering of statistics. 
D) standard of living and pay really are determined by purchasing power, not number of dollars. 
E) the real wage shows that pay actually has been falling for a long time. 
A) the real wage shows absolute buying power and allows economists to compare U.S.pay to that of other countries. 
B) because of inflation, the nominal wage often understates the actual rise in purchasing power. 
C) the real wage simplifies the gathering of statistics. 
D) standard of living and pay really are determined by purchasing power, not number of dollars. 
E) the real wage shows that pay actually has been falling for a long time.

Question 17

Wage dispersion refers to

Accepted Answer

A) the way people spend their wages. 
B) how wage levels are distributed among different groups of people. 
C) how wage levels are distributed geographically. 
D) how corporate earnings are dispersed among stockholders. 
E) the amount of wages lost due to relocation activities. 
A) the way people spend their wages. 
B) how wage levels are distributed among different groups of people. 
C) how wage levels are distributed geographically. 
D) how corporate earnings are dispersed among stockholders. 
E) the amount of wages lost due to relocation activities.

Question 18

Which of the following statements about discrimination is true?

Accepted Answer

A) The effects of discrimination can be illustrated through supply and demand by shifting the supply curve. 
B) Competitive markets lead to discrimination by allowing employers freedom to hire and fire at will. 
C) Wage differences among different groups in society cannot be fully explained by productivity and experience. 
D) The fact that women are paid 70 percent of what men are paid is proof of gender discrimination. 
E) During the 1980s, the average pay gap between men and women increased. 
A) The effects of discrimination can be illustrated through supply and demand by shifting the supply curve. 
B) Competitive markets lead to discrimination by allowing employers freedom to hire and fire at will. 
C) Wage differences among different groups in society cannot be fully explained by productivity and experience. 
D) The fact that women are paid 70 percent of what men are paid is proof of gender discrimination. 
E) During the 1980s, the average pay gap between men and women increased.

Question 19

Explain why a firm's derived demand for labor curve is its marginal revenue product curve.

Accepted Answer

The firm wishes to maximize profit. If i

Question 20

Labor productivity is a poor indicator of marginal product of labor.

Accepted Answer

A) True 
 B)False

Exam 13: Labor Markets

Draw a labor supply curve and label it to indicate where the substitution effect dominates and where the income effect dominates.

An increase in a firm's product price causes

Exhibit 13-2 -Refer to Exhibit 13-2. If the wage per day is $55 and the firm is employing 6 units of labor,

The real wage is

The income and substitution effects of a change in the wage rate always works in opposite directions.

Piece-rate wages are most commonly used when

Give two explanations why college graduates earn higher wages than those who do not graduate from college.

The statement "you couldn't pay me all the money in the world to do that job" reflects attitudes that lead to

Which of the following is true of a standard supply and demand diagram for the labor market?

In the United States, an increase in labor productivity growth since the mid-1990s has been accompanied by a(n)

The Teamsters' (truck drivers) union is a(n) ____ union.

The demand for labor is derived from the

Studies have not shown definitively that the minimum wage causes unemployment.

The substitution effect in an individual's labor/leisure choice is that

Compensation

The reason that economists are concerned with looking at the real wage is that

Wage dispersion refers to

Which of the following statements about discrimination is true?

Explain why a firm's derived demand for labor curve is its marginal revenue product curve.

Labor productivity is a poor indicator of marginal product of labor.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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