Question 1

To derive the labor demand curve for a particular market, one should ________ for all the firms in the market.

Accepted Answer

A) vertically sum the value of the marginal product of labor curves 
B) vertically sum the marginal product of labor curves 
C) horizontally sum the value of the marginal product of labor curves 
D) horizontally sum the marginal product of labor curves 
A) vertically sum the value of the marginal product of labor curves 
B) vertically sum the marginal product of labor curves 
C) horizontally sum the value of the marginal product of labor curves 
D) horizontally sum the marginal product of labor curves

Question 2

The reason people in Professor Rawls' thought experiment would choose an equal distribution of income is that:

Accepted Answer

A) they are concerned about the welfare of others. 
B) they fear ending up in a disadvantaged position themselves. 
C) people are risk-neutral. 
D) it is the easiest distribution to implement. 
A) they are concerned about the welfare of others. 
B) they fear ending up in a disadvantaged position themselves. 
C) people are risk-neutral. 
D) it is the easiest distribution to implement.

Question 3

According to the textbook, the union wage premium for workers with the same amount of human capital is about ________.

Accepted Answer

A) 40 percent 
B) 30 percent 
C) 20 percent 
D) 10 percent 
A) 40 percent 
B) 30 percent 
C) 20 percent 
D) 10 percent

Question 4

Jen is offered a job answering the phone in the State U economics department during lunchtime, from noon to 1 p.m., Tuesdays and Thursdays. Her reservation wage for this job is $15 per hour. Now suppose the department chair announces that the $150 per week earnings from the job will be divided equally among Jen and 299 other students in the department. How much economic surplus will Jen enjoy each week if she accepts the job?

Accepted Answer

A) $0.50 
B) -$14.00 
C) -$29.00 
D) -$29.50 
A) $0.50 
B) -$14.00 
C) -$29.00 
D) -$29.50

Question 5

Consider the accompanying figure representing the labor market below. Suppose the government passes a minimum wage requiring employers to pay at least $8.00 per hour.   Employment will fall by ________ person-hours per day as a result of the minimum wage.

Accepted Answer

A) 2,000 
B) 4,000 
C) 6,000 
D) 8,000 
A) 2,000 
B) 4,000 
C) 6,000 
D) 8,000

Question 6

For people with very low incomes, the Earned Income Tax Credit operates like a(n):

Accepted Answer

A) tax on wages. 
B) lump sum transfer. 
C) wage subsidy. 
D) in-kind transfer. 
A) tax on wages. 
B) lump sum transfer. 
C) wage subsidy. 
D) in-kind transfer.

Question 7

The optimal number of workers for a perfectly competitive firm to hire occurs when

Accepted Answer

A) total labor cost equals total revenue. 
B) diminishing marginal productivity is first experienced. 
C) the wage rate equals the marginal product of the last worker. 
D) the wage rate equals the value of marginal product of the last worker. 
A) total labor cost equals total revenue. 
B) diminishing marginal productivity is first experienced. 
C) the wage rate equals the marginal product of the last worker. 
D) the wage rate equals the value of marginal product of the last worker.

Question 8

Suppose the Tasty Taco Company produces tacos. The number of tacos it can produce each hour depends on the number of workers it hires, as shown in the accompanying table. In addition, each taco can be sold for 50 cents more than the cost of the ingredients needed to produce it.  
$$\begin{array} { | c | c | } 
\hline \text { Number af warkers per hour } & \text { Number of tacas per hour } \
\hline 0 & 0 \
\hline 1 & 25 \
\hline 2 & 45 \
\hline 3 & 60 \
\hline 4 & 70 \
\hline 5 & 75 \
\hline
\end{array}$$  
What is the value of the marginal product of the 4th worker hired each hour?

Accepted Answer

A) $70 
B) $35 
C) $5 
D) $10 
A) $70 
B) $35 
C) $5 
D) $10

Question 9

Suppose that this graph describes the current labor market for high school teachers:   Suppose supply of labor decreases. At the new equilibrium, wages would be ________ and ________ teachers would be hired.

Accepted Answer

A) higher; more 
B) higher; fewer 
C) lower; fewer 
D) lower; more 
A) higher; more 
B) higher; fewer 
C) lower; fewer 
D) lower; more

Question 10

In terms of improving the standard of living of the poor, one drawback on the earned income tax credit (EITC)is that:

Accepted Answer

A) it provides workers with in-kind transfers. 
B) it's only available to individuals whose incomes are above a certain threshold. 
C) it provides no benefits to people who are unemployed. 
D) it gives firms a strong incentive to lay off low-wage workers. 
A) it provides workers with in-kind transfers. 
B) it's only available to individuals whose incomes are above a certain threshold. 
C) it provides no benefits to people who are unemployed. 
D) it gives firms a strong incentive to lay off low-wage workers.

Question 11

To say that a given welfare program is means-tested implies that:

Accepted Answer

A) in order to qualify, one must have the means. 
B) the size of the payment reflects the mean value of consumption based on family size. 
C) in order to qualify, one must show that one means to find a job. 
D) the more income one earns, the smaller the size of the benefit. 
A) in order to qualify, one must have the means. 
B) the size of the payment reflects the mean value of consumption based on family size. 
C) in order to qualify, one must show that one means to find a job. 
D) the more income one earns, the smaller the size of the benefit.

Question 12

In 1996, the Personal Responsibility Act:

Accepted Answer

A) transferred responsibility for welfare programs from the state to the federal level. 
B) placed a five-year lifetime limit on welfare payments to any given recipient. 
C) increased the federal minimum wage. 
D) established the earned income tax credit (or EIT
C) . 
A) transferred responsibility for welfare programs from the state to the federal level. 
B) placed a five-year lifetime limit on welfare payments to any given recipient. 
C) increased the federal minimum wage. 
D) established the earned income tax credit (or EIT
C) .

Question 13

If demand for the product you make were to suddenly decline, you would expect the equilibrium price of the product to fall, which would lead to:

Accepted Answer

A) an increase in the VMP of each worker. 
B) a decrease in the VMP of each worker. 
C) no change the VMP of each worker because product prices don't affect worker productivity. 
D) a decrease in the marginal productivity of each worker. 
A) an increase in the VMP of each worker. 
B) a decrease in the VMP of each worker. 
C) no change the VMP of each worker because product prices don't affect worker productivity. 
D) a decrease in the marginal productivity of each worker.

Question 14

Gino's Pizza shop hires workers in a competitive market to make pizza. The ingredients required to make each pizza cost $5. Daily output at Gino's Pizza varies with the number of workers hired, as shown in the table:  
$$\begin{array} { | c | c | } 
\hline \text { Number di warkers } & \text { Pizfas/day } \
\hline 0 & 0 \
\hline 1 & 16 \
\hline 2 & 36 \
\hline 3 & 54 \
\hline 4 & 70 \
\hline 5 & 84 \
\hline 6 & 96 \
\hline
\end{array}$$  
If pizzas sell for $8 each, what is the value marginal product for the 4?? worker?

Accepted Answer

A) $96 per day 
B) $112 per day 
C) $48 per day 
D) $128 per day 
A) $96 per day 
B) $112 per day 
C) $48 per day 
D) $128 per day

Question 15

Consider the accompanying figure representing the labor market below. Suppose the government passes a minimum wage requiring employers to pay at least $8.00 per hour.   Prior to the imposition of the minimum wage, worker surplus is ________ per day, and after the imposition of the minimum wage, worker surplus is ________ per day.

Accepted Answer

A) $9,000; $1,000 
B) $9,000; $5,000 
C) $18,000; $2,000 
D) $18,000; $14,000 
A) $9,000; $1,000 
B) $9,000; $5,000 
C) $18,000; $2,000 
D) $18,000; $14,000

Question 16

Espresso Yourself Coffee Shop hires workers in a competitive labor market to make coffee. The ingredients required to make each cup of coffee cost 50 cents. The coffee shop's hourly output of coffee varies with the number of workers hired, as shown in the table. Each cup of coffee sells for $2.00. $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Number df } \
\text { wurkers }
\end{array} & \begin{array} { c } 
\text { Caftee } \
\text { (cups/hour) }
\end{array} \
\hline 0 & 0 \
\hline 1 & 25 \
\hline 2 & 45 \
\hline 3 & 60 \
\hline 4 & 70 \
\hline 5 & 75 \
\hline
\end{array}$$  
The dollar value to the coffee shop of hiring the fifth worker is ________ per hour.

Accepted Answer

A) $1.50 
B) $2.00 
C) $5.00 
D) $7.50 
A) $1.50 
B) $2.00 
C) $5.00 
D) $7.50

Question 17

Sam owns a candy factory and hires workers in a competitive labor market to pack cases of candy. The company's weekly output of cases of candy varies with the number of workers hired, as shown in the following table: $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Number d } \
\text { warkers }
\end{array} & \text { Cases/reek } \
\hline 0 & 0 \
\hline 1 & 160 \
\hline 2 & 310 \
\hline 3 & 450 \
\hline 4 & 580 \
\hline 5 & 700 \
\hline 6 & 810 \
\hline
\end{array}$$  
If each case sells for $3 more than the cost of the materials used in producing it, then the most Sam would pay the 5?? worker is ________ per week.

Accepted Answer

A) $330 
B) $360 
C) $390 
D) $120 
A) $330 
B) $360 
C) $390 
D) $120

Question 18

Suppose that this graph describes the current labor market for high school teachers:   If the wage is w*, then:

Accepted Answer

A) there will be a shortage of certified teachers. 
B) there will be a surplus of certified teachers. 
C) there will be neither a shortage nor a surplus of certified teachers. 
D) teachers will be underpaid. 
A) there will be a shortage of certified teachers. 
B) there will be a surplus of certified teachers. 
C) there will be neither a shortage nor a surplus of certified teachers. 
D) teachers will be underpaid.

Question 19

Curly just graduated from State U and has three job offers: teaching at a prestigious private high school nine months a year with summers off, working forty hours a week at a bank in a small city, and working more than sixty hours a week for a high-powered investment firm in New York. The annual salary for each of these offers is probably:

Accepted Answer

A) lowest at the investment firm, in the middle at the bank, and highest at the high school. 
B) lowest at the bank, in the middle at the investment firm, and highest at the high school. 
C) lowest at the high school, in the middle at the investment firm, and highest at the bank. 
D) lowest at the high school, in the middle at the bank, and highest at the investment firm. 
A) lowest at the investment firm, in the middle at the bank, and highest at the high school. 
B) lowest at the bank, in the middle at the investment firm, and highest at the high school. 
C) lowest at the high school, in the middle at the investment firm, and highest at the bank. 
D) lowest at the high school, in the middle at the bank, and highest at the investment firm.

Question 20

If the labor market in the United States is perfectly competitive, the labor supply curve would shift to the right if:

Accepted Answer

A) the United States relaxed its immigration laws. 
B) fewer mothers started returning to work after their children were born. 
C) firms replaced human workers with robots. 
D) firms opened more plants overseas. 
A) the United States relaxed its immigration laws. 
B) fewer mothers started returning to work after their children were born. 
C) firms replaced human workers with robots. 
D) firms opened more plants overseas.

Exam 13: Labor Markets, Poverty, and Income Distribution

To derive the labor demand curve for a particular market, one should ________ for all the firms in the market.

The reason people in Professor Rawls' thought experiment would choose an equal distribution of income is that:

According to the textbook, the union wage premium for workers with the same amount of human capital is about ________.

Consider the accompanying figure representing the labor market below. Suppose the government passes a minimum wage requiring employers to pay at least $8.00 per hour. Employment will fall by ________ person-hours per day as a result of the minimum wage.

For people with very low incomes, the Earned Income Tax Credit operates like a(n):

The optimal number of workers for a perfectly competitive firm to hire occurs when

Suppose that this graph describes the current labor market for high school teachers: Suppose supply of labor decreases. At the new equilibrium, wages would be ________ and ________ teachers would be hired.

In terms of improving the standard of living of the poor, one drawback on the earned income tax credit (EITC)is that:

To say that a given welfare program is means-tested implies that:

In 1996, the Personal Responsibility Act:

If demand for the product you make were to suddenly decline, you would expect the equilibrium price of the product to fall, which would lead to:

Suppose that this graph describes the current labor market for high school teachers: If the wage is w*, then:

If the labor market in the United States is perfectly competitive, the labor supply curve would shift to the right if:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

An Introduction to Behavioral Economics

Externalities, Property Rights, and the Environment

The Economics of Information

Public Goods and Tax Policy

International Trade and Trade Policy

Macroeconomics: The Birds Eye View of the Economy

Measuring Economic Activity: GDP and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Saving and Capital Formation

Money Prices and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economic Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: The Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Exchange Rates and the Open Economy

Filters

Suppose that this graph describes the current labor market for high school teachers: Suppose supply of labor decreases. At the new equilibrium, wages would be and teachers would be hired.