Question 1

If union action leads to a rise in the relative price of factors that are substitutes for union labor,

Accepted Answer

A)  the supply of union labor falls. 
B)  the quantity demanded of union labor falls. 
C)  the demand for union labor rises. 
D)  the supply of union labor rises. 
A)  the supply of union labor falls. 
B)  the quantity demanded of union labor falls. 
C)  the demand for union labor rises. 
D)  the supply of union labor rises.

Question 2

Exhibit 28-7
  
-Refer to Exhibit 28-7.The marginal factor cost of increasing employment from 20 to 30 workers

Accepted Answer

A)  is $14. 
B)  is $8. 
C)  is $7. 
D)  is $120. 
E)  is $100. 
A)  is $14. 
B)  is $8. 
C)  is $7. 
D)  is $120. 
E)  is $100.

Question 3

Labor unions have caused

Accepted Answer

A)  the fraction of national income that goes to labor (union and nonunion, combined) to increase. 
B)  the fraction of national income that goes to labor (union and nonunion, combined) to decrease. 
C)  almost no change in the fraction of national income that goes to labor (union and nonunion, combined). 
D)  the fraction of national income that goes to profits to rise. 
A)  the fraction of national income that goes to labor (union and nonunion, combined) to increase. 
B)  the fraction of national income that goes to labor (union and nonunion, combined) to decrease. 
C)  almost no change in the fraction of national income that goes to labor (union and nonunion, combined). 
D)  the fraction of national income that goes to profits to rise.

Question 4

Which of the following is false?

Accepted Answer

A)  For the monopsonist, marginal factor cost decreases as it buys additional units of a factor. 
B)  For the monopsonist, the supply curve of the factor it buys is different from the marginal factor cost curve. 
C)  The monopsonist buys that quantity of a factor at which marginal revenue product equals marginal factor cost. 
D)  The monopsonist pays its factors a dollar amount less than its marginal factor cost. 
A)  For the monopsonist, marginal factor cost decreases as it buys additional units of a factor. 
B)  For the monopsonist, the supply curve of the factor it buys is different from the marginal factor cost curve. 
C)  The monopsonist buys that quantity of a factor at which marginal revenue product equals marginal factor cost. 
D)  The monopsonist pays its factors a dollar amount less than its marginal factor cost.

Question 5

When firm A hires one worker it pays $8 an hour and its total labor cost is $8.When it hires a second worker,it has to pay $8.50 to each of its two workers and its total labor cost is $17.When it hires a third worker,it has to pay $9 to each of its three workers and its total labor cost is $27.For firm A,

Accepted Answer

A)  its marginal factor cost is above the wage rate it pays, except for the first worker it hires. 
B)  its marginal factor cost is above the wage rate it pays, except for the first two workers it hires. 
C)  its supply curve of labor lies above its marginal factor cost curve. 
D)  it is likely that marginal revenue product always lies above marginal factor cost. 
E)  none of the above 
A)  its marginal factor cost is above the wage rate it pays, except for the first worker it hires. 
B)  its marginal factor cost is above the wage rate it pays, except for the first two workers it hires. 
C)  its supply curve of labor lies above its marginal factor cost curve. 
D)  it is likely that marginal revenue product always lies above marginal factor cost. 
E)  none of the above

Question 6

An economist states,"In the case of monopsony,a minimum wage can increase the number of persons working,but in the case of perfect competition,a minimum wage decreases the number of persons working." This economist

Accepted Answer

A)  has stated something that is untrue. 
B)  is trying to hedge his or her bets. 
C)  is trying to be as precise as possible by stating the conditions under which certain things are predicted to occur. 
D)  is offering a normative judgment on labor markets. 
E)  a and d 
A)  has stated something that is untrue. 
B)  is trying to hedge his or her bets. 
C)  is trying to be as precise as possible by stating the conditions under which certain things are predicted to occur. 
D)  is offering a normative judgment on labor markets. 
E)  a and d

Question 7

A profit-maximizing monopsonist will pay a wage rate that is less than the marginal factor cost.

Accepted Answer

A) True 
 B)False

Question 8

In a monopsony model of the labor market,as more labor is hired,the marginal factor cost of labor

Accepted Answer

A)  decreases. 
B)  becomes zero. 
C)  remains constant. 
D)  increases. 
E)  becomes identical to the wage rate. 
A)  decreases. 
B)  becomes zero. 
C)  remains constant. 
D)  increases. 
E)  becomes identical to the wage rate.

Question 9

Exhibit 28-10
  
-Refer to Exhibit 28-10.If the firm in the exhibit is a monopsony,then the curve represented by the number 2 is its __________ curve,and the curve represented by the number 3 is its __________ curve.

Accepted Answer

A)  marginal factor cost; factor supply 
B)  factor supply; marginal revenue product 
C)  marginal revenue product; average total cost 
D)  marginal cost; marginal factor cost 
E)  factor supply; marginal factor cost 
A)  marginal factor cost; factor supply 
B)  factor supply; marginal revenue product 
C)  marginal revenue product; average total cost 
D)  marginal cost; marginal factor cost 
E)  factor supply; marginal factor cost

Question 10

It is possible for an increase in minimum wage to increase the number of workers hired in a competitive labor market,but not in a monopsony setting.

Accepted Answer

A) True 
 B)False

Question 11

Exhibit 28-12
  
-Refer to Exhibit 28-12. The profit-maximizing number of workers to hire for this firm is

Accepted Answer

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

Question 12

The total wage bill of a union will be maximized when the elasticity of demand for labor is unit elastic.

Accepted Answer

A) True 
 B)False

Question 13

If a labor union specifies that certain jobs can only be done by certain people (for example,only electricians can do electrical work),it is likely trying to

Accepted Answer

A)  affect the elasticity of demand for its labor. 
B)  reduce the availability of substitute factors for its labor. 
C)  increase the marginal physical product of its members. 
D)  a and b 
E)  none of the above 
A)  affect the elasticity of demand for its labor. 
B)  reduce the availability of substitute factors for its labor. 
C)  increase the marginal physical product of its members. 
D)  a and b 
E)  none of the above

Question 14

A firm that is the sole buyer in a factor market is known as a

Accepted Answer

A)  monopolist. 
B)  public employee union. 
C)  monopsonist. 
D)  perfect competitor. 
A)  monopolist. 
B)  public employee union. 
C)  monopsonist. 
D)  perfect competitor.

Question 15

Within the perfectly competitive market structure,consider a labor union that manages to obtain higher wages for its members.At the time the union obtains higher wages,the perfectly competitive firms are earning positive economic profits.It follows that

Accepted Answer

A)  initially higher wages will reduce profits. 
B)  in the long run product prices will be higher because of higher wages. 
C)  in the long run the firms in the industry will earn below normal profits. 
D)  in the short run the firms in the industry will necessarily earn below normal profits. 
E)  a and b 
A)  initially higher wages will reduce profits. 
B)  in the long run product prices will be higher because of higher wages. 
C)  in the long run the firms in the industry will earn below normal profits. 
D)  in the short run the firms in the industry will necessarily earn below normal profits. 
E)  a and b

Question 16

The right-to-work law specifies that

Accepted Answer

A)  everyone in the country has a right to work at a decent wage. 
B)  every worker has a right to a two-week paid vacation. 
C)  everyone in the country has a right to work, although it does not specify at any particular wage. 
D)  every worker has a right to require his employer to give him 30 days notice before terminating employment. 
E)  it is illegal to require union membership for purposes of employment. 
A)  everyone in the country has a right to work at a decent wage. 
B)  every worker has a right to a two-week paid vacation. 
C)  everyone in the country has a right to work, although it does not specify at any particular wage. 
D)  every worker has a right to require his employer to give him 30 days notice before terminating employment. 
E)  it is illegal to require union membership for purposes of employment.

Question 17

Exhibit 28-11
  
-Refer to Exhibit 28-11.The firm in the exhibit is a monopsony.We have deliberately not identified the three curves in the exhibit.They are simply curves 1,2,and 3.If (union)collective bargaining with the monopsony guarantees the wage rate that workers will be paid is W2,then how many more workers will the monopsony hire than it would hire if it could pay its chosen (or preferred)wage?

Accepted Answer

A)  Q4 - Q1 more workers 
B)  Q3 - Q2 more workers 
C)  Q2 - Q1 more workers 
D)  Q3 - Q1 more workers 
E)  Q4 - Q3 more workers 
A)  Q4 - Q1 more workers 
B)  Q3 - Q2 more workers 
C)  Q2 - Q1 more workers 
D)  Q3 - Q1 more workers 
E)  Q4 - Q3 more workers

Question 18

It is unlikely that very many (pure)monopsony firms exist today,given that workers are increasingly mobile.

Accepted Answer

A) True 
 B)False

Question 19

Exhibit 28-6
  
-Refer to Exhibit 28-6.L and W are the equilibrium quantity of labor employed and the wage rate respectively.A person arguing that a worker is being exploited if she is paid less than the value of her marginal product would say that the exhibit is an illustration of the fact that

Accepted Answer

A)  perfect competition entails labor exploitation. 
B)  monopoly entails labor exploitation. 
C)  monopoly entails no labor exploitation. 
D)  monopsony entails labor exploitation. 
E)  monopsony entails no labor exploitation. 
A)  perfect competition entails labor exploitation. 
B)  monopoly entails labor exploitation. 
C)  monopoly entails no labor exploitation. 
D)  monopsony entails labor exploitation. 
E)  monopsony entails no labor exploitation.

Question 20

Exhibit 28-3
  
-Refer to Exhibit 28-3.In the absence of collective bargaining,if the profit-maximizing monopsonist were to pay workers what their services were worth to it,it would pay

Accepted Answer

A)  W1. 
B)  W2. 
C)  W3. 
D)  some wage rate between W2 and W3. 
A)  W1. 
B)  W2. 
C)  W3. 
D)  some wage rate between W2 and W3.

Exam 28: Wages,Unions,and Labor

If union action leads to a rise in the relative price of factors that are substitutes for union labor,

Exhibit 28-7 -Refer to Exhibit 28-7.The marginal factor cost of increasing employment from 20 to 30 workers

Labor unions have caused

Which of the following is false?

An economist states,"In the case of monopsony,a minimum wage can increase the number of persons working,but in the case of perfect competition,a minimum wage decreases the number of persons working." This economist

A profit-maximizing monopsonist will pay a wage rate that is less than the marginal factor cost.

In a monopsony model of the labor market,as more labor is hired,the marginal factor cost of labor

Exhibit 28-10 -Refer to Exhibit 28-10.If the firm in the exhibit is a monopsony,then the curve represented by the number 2 is its __________ curve,and the curve represented by the number 3 is its __________ curve.

It is possible for an increase in minimum wage to increase the number of workers hired in a competitive labor market,but not in a monopsony setting.

Exhibit 28-12 -Refer to Exhibit 28-12. The profit-maximizing number of workers to hire for this firm is

The total wage bill of a union will be maximized when the elasticity of demand for labor is unit elastic.

If a labor union specifies that certain jobs can only be done by certain people (for example,only electricians can do electrical work),it is likely trying to

A firm that is the sole buyer in a factor market is known as a

Within the perfectly competitive market structure,consider a labor union that manages to obtain higher wages for its members.At the time the union obtains higher wages,the perfectly competitive firms are earning positive economic profits.It follows that

The right-to-work law specifies that

It is unlikely that very many (pure)monopsony firms exist today,given that workers are increasingly mobile.

Exhibit 28-6 -Refer to Exhibit 28-6.L and W are the equilibrium quantity of labor employed and the wage rate respectively.A person arguing that a worker is being exploited if she is paid less than the value of her marginal product would say that the exhibit is an illustration of the fact that

Exhibit 28-3 -Refer to Exhibit 28-3.In the absence of collective bargaining,if the profit-maximizing monopsonist were to pay workers what their services were worth to it,it would pay

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Exhibit 28-10 -Refer to Exhibit 28-10.If the firm in the exhibit is a monopsony,then the curve represented by the number 2 is its curve,and the curve represented by the number 3 is its curve.