Question 1

In determining workers' pay, which of the following factors is not an important consideration?

Accepted Answer

A) Exactly what constitutes the pay of a worker 
B) The effects of inflation 
C) Every factor listed is important in determining worker pay. 
D) Time spent working 
E) The interval of time between compensation days 
A) Exactly what constitutes the pay of a worker 
B) The effects of inflation 
C) Every factor listed is important in determining worker pay. 
D) Time spent working 
E) The interval of time between compensation days

Question 2

Exhibit 13-1  
-Refer to Exhibit 13-1. Suppose the firm is competitive and the output price is $10. Also suppose the prevailing wage is $200 per week. The firm will be able to hire ____ workers.

Accepted Answer

A) 5 
B) 3 
C) 2 
D) 4 
E) 6 
A) 5 
B) 3 
C) 2 
D) 4 
E) 6

Question 3

For a profit-maximizing competitive firm, its marginal revenue product curve is its labor demand curve.

Accepted Answer

A) True 
 B)False

Question 4

A monopsony is a

Accepted Answer

A) single seller. 
B) single buyer. 
C) market with many buyers. 
D) market with many sellers. 
E) firm that does not maximize profits. 
A) single seller. 
B) single buyer. 
C) market with many buyers. 
D) market with many sellers. 
E) firm that does not maximize profits.

Question 5

Suppose a competitive firm that is profit-maximizing pays a wage of $750 per week, and the price of its output is $15 per unit. Based on this information, one may surmise that the firm's marginal product is

Accepted Answer

A) $750. 
B) 15 units. 
C) $50. 
D) 50 units. 
E) $15. 
A) $750. 
B) 15 units. 
C) $50. 
D) 50 units. 
E) $15.

Question 6

Suppose the government is considering implementing a minimum wage of $10. With the aid of a graph, explain the consequences of the minimum wage law in the competitive labor market. Your explanation should include the gains or losses to firms, workers, and society as a whole.

Accepted Answer

If the minimum wage is below the equilib

Question 7

Piece-rate wage contracts are most common in occupations that can be monitored easily by managers.

Accepted Answer

A) True 
 B)False

Question 8

A credit-card company is considering using telephone solicitation to increase its sales. Under what circumstances should it pay its solicitors a commission for every lead provided, and under what circumstances should it pay them an hourly wage?

Accepted Answer

The company would be better of

Question 9

According to the theory of compensating wage differentials, people working in construction sites are paid more than people with the same skills but working in offices. The reason is the different working conditions between construction sites and the indoor environment.

Accepted Answer

A) True 
 B)False

Question 10

If the substitution effect is stronger than the income effect, then an increase in the wage rate will increase the quantity of labor supply.

Accepted Answer

A) True 
 B)False

Question 11

The contribution of one more unit of labor to total revenues is called

Accepted Answer

A) marginal revenue. 
B) marginal product. 
C) total product. 
D) marginal revenue product. 
E) total revenue product. 
A) marginal revenue. 
B) marginal product. 
C) total product. 
D) marginal revenue product. 
E) total revenue product.

Question 12

Exhibit 13-4  
-Refer to Exhibit 13-4. Over the segment BC of the curve,

Accepted Answer

A) the substitution effect is stronger than the income effect. 
B) the income and substitution effects are evenly matched. 
C) the income effect is stronger than the substitution effect. 
D) income is so high that work is unnecessary. 
E) irrational behavior has set in. 
A) the substitution effect is stronger than the income effect. 
B) the income and substitution effects are evenly matched. 
C) the income effect is stronger than the substitution effect. 
D) income is so high that work is unnecessary. 
E) irrational behavior has set in.

Question 13

Which of the following statements is true?

Accepted Answer

A) Fringe benefits are not part of a person's total earnings. 
B) Fringe benefits do not affect a person's decision whether to accept a job. 
C) Compensation and fringe benefits are unrelated concepts. 
D) Fringe benefits are taxed just like regular money pay. 
E) Fringe benefits have grown as a percentage of workers' total pay. 
A) Fringe benefits are not part of a person's total earnings. 
B) Fringe benefits do not affect a person's decision whether to accept a job. 
C) Compensation and fringe benefits are unrelated concepts. 
D) Fringe benefits are taxed just like regular money pay. 
E) Fringe benefits have grown as a percentage of workers' total pay.

Question 14

If the nominal wage is $25 per hour and the consumer price index (CPI) is 1.75, then the real wage is

Accepted Answer

A) $14.29. 
B) $23.25. 
C) $26.75. 
D) $43.75. 
E) $25.00. 
A) $14.29. 
B) $23.25. 
C) $26.75. 
D) $43.75. 
E) $25.00.

Question 15

Derived demand is demand that is derived from consumer tastes, preferences, and incomes.

Accepted Answer

A) True 
 B)False

Question 16

Exhibit 13-2  
-Refer to Exhibit 13-2. If the marginal revenue product (MRP) of one additional worker is $2 and the wage of that worker is $4, then

Accepted Answer

A) the firm is earning a profit from the additional worker equal to $2. 
B) the sixth worker should be laid off. 
C) more workers should be employed because the firm is earning a profit from the last worker employed. 
D) the sixth worker should be employed, but no more workers should be employed. 
E) more workers should be employed. 
A) the firm is earning a profit from the additional worker equal to $2. 
B) the sixth worker should be laid off. 
C) more workers should be employed because the firm is earning a profit from the last worker employed. 
D) the sixth worker should be employed, but no more workers should be employed. 
E) more workers should be employed.

Question 17

The alternative to work postulated by economists is

Accepted Answer

A) leisure. 
B) contemplation. 
C) less work. 
D) dying. 
E) more work. 
A) leisure. 
B) contemplation. 
C) less work. 
D) dying. 
E) more work.

Question 18

Unionists often justify their seemingly monopolistic tactics by claiming that businesses are monopsonists.

Accepted Answer

A) True 
 B)False

Question 19

A monopsony is a single seller.

Accepted Answer

A) True 
 B)False

Question 20

In the United States, because the amount of part-time work has increased and the average number of hours worked per week has increased,

Accepted Answer

A) average annual earnings have increased less rapidly than average weekly or hourly earnings. 
B) average annual earnings have increased more rapidly than average weekly or hourly earnings. 
C) average weekly earnings have increased at the same rate as average hourly earnings. 
D) average weekly earnings have increased more rapidly than average hourly earnings. 
E) average weekly earnings have increased less rapidly than average hourly earnings. 
A) average annual earnings have increased less rapidly than average weekly or hourly earnings. 
B) average annual earnings have increased more rapidly than average weekly or hourly earnings. 
C) average weekly earnings have increased at the same rate as average hourly earnings. 
D) average weekly earnings have increased more rapidly than average hourly earnings. 
E) average weekly earnings have increased less rapidly than average hourly earnings.

Exam 13: Labor Markets

In determining workers' pay, which of the following factors is not an important consideration?

Exhibit 13-1 -Refer to Exhibit 13-1. Suppose the firm is competitive and the output price is $10. Also suppose the prevailing wage is $200 per week. The firm will be able to hire ____ workers.

For a profit-maximizing competitive firm, its marginal revenue product curve is its labor demand curve.

A monopsony is a

Suppose a competitive firm that is profit-maximizing pays a wage of $750 per week, and the price of its output is $15 per unit. Based on this information, one may surmise that the firm's marginal product is

Suppose the government is considering implementing a minimum wage of $10. With the aid of a graph, explain the consequences of the minimum wage law in the competitive labor market. Your explanation should include the gains or losses to firms, workers, and society as a whole.

Piece-rate wage contracts are most common in occupations that can be monitored easily by managers.

A credit-card company is considering using telephone solicitation to increase its sales. Under what circumstances should it pay its solicitors a commission for every lead provided, and under what circumstances should it pay them an hourly wage?

According to the theory of compensating wage differentials, people working in construction sites are paid more than people with the same skills but working in offices. The reason is the different working conditions between construction sites and the indoor environment.

If the substitution effect is stronger than the income effect, then an increase in the wage rate will increase the quantity of labor supply.

The contribution of one more unit of labor to total revenues is called

Exhibit 13-4 -Refer to Exhibit 13-4. Over the segment BC of the curve,

Which of the following statements is true?

If the nominal wage is $25 per hour and the consumer price index (CPI) is 1.75, then the real wage is

Derived demand is demand that is derived from consumer tastes, preferences, and incomes.

Exhibit 13-2 -Refer to Exhibit 13-2. If the marginal revenue product (MRP) of one additional worker is $2 and the wage of that worker is $4, then

The alternative to work postulated by economists is

Unionists often justify their seemingly monopolistic tactics by claiming that businesses are monopsonists.

A monopsony is a single seller.

In the United States, because the amount of part-time work has increased and the average number of hours worked per week has increased,

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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