Exam 13: Labor Markets

Use the definition of the demand for labor as the marginal revenue product of labor to show how the two statements below can explain why there has been a decline in unskilled workers' real wages.

Exhibit 13-3 -Refer to Exhibit 13-3. Suppose the weekly wage is $500 and the output price is $40 per unit. Calculate the marginal revenue product of the fourth worker. (Hint: Assume this is a competitive firm.)

If the income effect is stronger than the substitution effect, then the labor supply curve will be backward-bending.

Because labor demand is a derived demand, the labor demand curve is upward-sloping.

Real wages are actual wages less taxes.

A deferred-payment contract

Exhibit 13-3 -If marginal revenue product is $8 per hour, the wage is $15 per hour, and the output price is $10, calculate the marginal product.

For a competitive firm to maximize profits, it must hire labor up to the point at which marginal revenue product is equal to the wage rate.

Piece-rate wage contracts create incentives for workers to increase their productivity.

The only reason for wage dispersion is differences in individuals' education.

What is a compensating wage differential? Is the differential a result of supply shifts or demand shifts?

To gain human capital, an individual usually has to give up some income for a period of time.

The marginal revenue product of labor is

Suppose that in one year the nominal wage rises from $12 to $16 and the price index changes from 0.75 to 1. Which grew faster, the nominal wage or the real wage?

A major reason for the recent trend of wage dispersion in the United States is

A firm with market power in the output market adjusts labor to equate the wage with

Union leaders often claim that they must establish the union as a monopoly provider of labor in order to offset the market power of employers. This claim essentially states that unionized firms are

A firm with market power in the output market

The market demand for labor relates the quantity of labor demand to price of goods and services that consumers pay.

The average real wage gap between those with college educations and those with only high-school educations has been growing.