Question 1

The cross-elasticity of labor with respect to capital is

Accepted Answer

A) the change in labor relative to a change in capital. 
B) the change in wages relative to a change in the price of capital. 
C) the percent change in labor relative to a percent change in capital. 
D) the percent change in wages relative to a percent change in the price of capital. 
E) the percent change in labor relative to a percent change in the price of capital. 
A) the change in labor relative to a change in capital. 
B) the change in wages relative to a change in the price of capital. 
C) the percent change in labor relative to a percent change in capital. 
D) the percent change in wages relative to a percent change in the price of capital. 
E) the percent change in labor relative to a percent change in the price of capital.

Question 2

What is an example of the scale effect?

Accepted Answer

A) Workers choose to provide more hours of labor when the wage rate decreases. 
B) Hiring more labor as long as the marginal product of labor is positive. 
C) The firm expands output when production costs fall. 
D) The firm expands output when production costs increase. 
E) The firm hires more labor when the wage falls because labor has become relatively cheaper compared to the price of other factors of production. 
A) Workers choose to provide more hours of labor when the wage rate decreases. 
B) Hiring more labor as long as the marginal product of labor is positive. 
C) The firm expands output when production costs fall. 
D) The firm expands output when production costs increase. 
E) The firm hires more labor when the wage falls because labor has become relatively cheaper compared to the price of other factors of production.

Question 3

How does a profit-maximizing firm that is operating in a competitive labor market respond to an increase in the wage rate?

Accepted Answer

A) The firm will demand less capital due to the substitution effect. 
B) The firm will demand more labor due to the substitution effect. 
C) The firm will produce less output due to the scale effect. 
D) The firm will demand more capital due to the scale effect. 
E) The firm will demand more labor due to the scale effect. 
A) The firm will demand less capital due to the substitution effect. 
B) The firm will demand more labor due to the substitution effect. 
C) The firm will produce less output due to the scale effect. 
D) The firm will demand more capital due to the scale effect. 
E) The firm will demand more labor due to the scale effect.

Question 4

In the United States, the federal minimum wage is legislated in nominal terms.This means that

Accepted Answer

A) the federal minimum wage is indexed for inflation. 
B) the federal minimum wage historically decreases in value during stretches when the minimum wage is not increased. 
C) employers do not have to pay payroll taxes on wages paid to minimum wage workers. 
D) unemployed workers collect government assistance equal to the minimum wage. 
E) the government pays the minimum wage to all local, state, and federal workers. 
A) the federal minimum wage is indexed for inflation. 
B) the federal minimum wage historically decreases in value during stretches when the minimum wage is not increased. 
C) employers do not have to pay payroll taxes on wages paid to minimum wage workers. 
D) unemployed workers collect government assistance equal to the minimum wage. 
E) the government pays the minimum wage to all local, state, and federal workers.

Question 5

How would imposing a minimum wage above the market clearing wage affect employment in a competitive labor market?

Accepted Answer

A) Employment would increase as previously unemployed workers would be more encouraged to find a job. 
B) Employment would increase because a higher minimum wage would create more jobs for low-skilled workers. 
C) Employment would increase as firms would illegally hire workers below the original competitive wage. 
D) Employment would be unchanged as workers are non-responsive to low wages. 
E) Employment would decrease as some workers who are willing to work at the lower competitive wage would no longer be able to find work. 
A) Employment would increase as previously unemployed workers would be more encouraged to find a job. 
B) Employment would increase because a higher minimum wage would create more jobs for low-skilled workers. 
C) Employment would increase as firms would illegally hire workers below the original competitive wage. 
D) Employment would be unchanged as workers are non-responsive to low wages. 
E) Employment would decrease as some workers who are willing to work at the lower competitive wage would no longer be able to find work.

Question 6

Labor demand is more elastic the greater the elasticity of demand for the firm's output because

Accepted Answer

A) the firm would see its quantity demanded fall substantially if the firm tried to pass increased labor costs through to the consumer by increasing the price of the output good. 
B) the firm's output price falls when the firm produces less output. 
C) a firm that operates in a competitive output market cannot lower its price. 
D) capital is usually price elastic. 
E) the firm will want to hire fewer workers when the wage rate increases. 
A) the firm would see its quantity demanded fall substantially if the firm tried to pass increased labor costs through to the consumer by increasing the price of the output good. 
B) the firm's output price falls when the firm produces less output. 
C) a firm that operates in a competitive output market cannot lower its price. 
D) capital is usually price elastic. 
E) the firm will want to hire fewer workers when the wage rate increases.

Question 7

Firms usually face asymmetric variable adjustment costs because

Accepted Answer

A) hiring costs are typically high. 
B) firing workers is relatively easy. 
C) firing workers can be difficult and costly for legal reasons. 
D) workers are reluctant to change jobs during a recession. 
E) firms vary in size. 
A) hiring costs are typically high. 
B) firing workers is relatively easy. 
C) firing workers can be difficult and costly for legal reasons. 
D) workers are reluctant to change jobs during a recession. 
E) firms vary in size.

Question 8

The imposition of a minimum wage on a competitive labor market will likely

Accepted Answer

A) create additional employment opportunities because some low-skilled workers will now see their wage increase. 
B) lower the wages of workers earning more than the minimum wage. 
C) create unemployment as some people enter the labor market while some firms reduce the quantity of labor they are willing to employ due to the increased wage. 
D) increase unemployment of high-skilled workers as firms substitute high-skilled labor for low-skilled labor. 
E) lower the unemployment rate of low-income families. 
A) create additional employment opportunities because some low-skilled workers will now see their wage increase. 
B) lower the wages of workers earning more than the minimum wage. 
C) create unemployment as some people enter the labor market while some firms reduce the quantity of labor they are willing to employ due to the increased wage. 
D) increase unemployment of high-skilled workers as firms substitute high-skilled labor for low-skilled labor. 
E) lower the unemployment rate of low-income families.

Question 9

Marissa owns a small lunch shop.The shop's kitchen is small, so it can only accommodate one worker at any one time.The shop is only open from 11:30am - 1:30pm each day.Which of the following options is Marissa the most likely to pursue if economic pressures lower the competitive wage she pays her worker by 5 percent?

Accepted Answer

A) Borrow capital to triple the size of her kitchen. 
B) Hire a second worker. 
C) Extend her business hours. 
D) Shut down her shop. 
E) Raise her prices. 
A) Borrow capital to triple the size of her kitchen. 
B) Hire a second worker. 
C) Extend her business hours. 
D) Shut down her shop. 
E) Raise her prices.

Question 10

For which reason is increasing the federal minimum wage not a good anti-poverty program?

Accepted Answer

A) It is very costly for the government. 
B) Roughly two-thirds of minimum wage earners are not the primary worker in their household. 
C) Increasing the federal minimum wage will likely increase employment opportunities. 
D) The minimum wage discriminates against minorities. 
E) The minimum wage discriminates against the young. 
A) It is very costly for the government. 
B) Roughly two-thirds of minimum wage earners are not the primary worker in their household. 
C) Increasing the federal minimum wage will likely increase employment opportunities. 
D) The minimum wage discriminates against minorities. 
E) The minimum wage discriminates against the young.

The cross-elasticity of labor with respect to capital is

What is an example of the scale effect?

How does a profit-maximizing firm that is operating in a competitive labor market respond to an increase in the wage rate?

In the United States, the federal minimum wage is legislated in nominal terms.This means that

How would imposing a minimum wage above the market clearing wage affect employment in a competitive labor market?

Labor demand is more elastic the greater the elasticity of demand for the firm's output because

Firms usually face asymmetric variable adjustment costs because

The imposition of a minimum wage on a competitive labor market will likely

For which reason is increasing the federal minimum wage not a good anti-poverty program?

Introduction to Labor Economics

Labor Supply

Labor Market Equilibrium

Compensating Wage Differentials

Human Capital

The Wage Structure

Labor Mobility

Labor Market Discrimination

Labor Unions

Incentive Pay

Unemployment

Filters

Exam 3: Labor Demand

The cross-elasticity of labor with respect to capital is

What is an example of the scale effect?

How does a profit-maximizing firm that is operating in a competitive labor market respond to an increase in the wage rate?

In the United States, the federal minimum wage is legislated in nominal terms.This means that

How would imposing a minimum wage above the market clearing wage affect employment in a competitive labor market?

Labor demand is more elastic the greater the elasticity of demand for the firm's output because

Firms usually face asymmetric variable adjustment costs because

The imposition of a minimum wage on a competitive labor market will likely

For which reason is increasing the federal minimum wage not a good anti-poverty program?

Introduction to Labor Economics

Labor Supply

Labor Market Equilibrium

Compensating Wage Differentials

Human Capital

The Wage Structure

Labor Mobility

Labor Market Discrimination

Labor Unions

Incentive Pay

Unemployment

Filters