Question 1

A firm hiring labor in a perfectly competitive labor market faces a

Accepted Answer

A)  downsloping labor supply curve and upsloping labor demand curve. 
B)  upsloping labor supply curve and downsloping labor demand curve. 
C)  upsloping labor supply curve and horizontal labor demand curve. 
D)  horizontal competitive wage curve and downsloping labor demand curve. 
A)  downsloping labor supply curve and upsloping labor demand curve. 
B)  upsloping labor supply curve and downsloping labor demand curve. 
C)  upsloping labor supply curve and horizontal labor demand curve. 
D)  horizontal competitive wage curve and downsloping labor demand curve.

Question 2

Unions prefer agency shops to open shops.

Accepted Answer

A) True 
 B)False

Question 3

Which one of the following research findings is most consistent with the hypothesis that unions increase productivity?

Accepted Answer

A)  Other things equal, firm profits are lower where unions are present. 
B)  Union workers receive, on average, higher fringe benefits relative to wages than nonunion workers. 
C)  The average amount of work time lost annually to strikes is surprisingly small. 
D)  Labor turnover is less in unionized firms than in nonunionized firms. 
A)  Other things equal, firm profits are lower where unions are present. 
B)  Union workers receive, on average, higher fringe benefits relative to wages than nonunion workers. 
C)  The average amount of work time lost annually to strikes is surprisingly small. 
D)  Labor turnover is less in unionized firms than in nonunionized firms.

Question 4

Compared to a purely competitive firm, a monopsonist will pay

Accepted Answer

A)  a higher wage rate to its workers. 
B)  lower wages but hire more workers than the purely competitive firm. 
C)  lower wage rates and hire fewer workers than the purely competitive firm. 
D)  lower wages, while hiring the same quantity of workers as the purely competitive firm. 
A)  a higher wage rate to its workers. 
B)  lower wages but hire more workers than the purely competitive firm. 
C)  lower wage rates and hire fewer workers than the purely competitive firm. 
D)  lower wages, while hiring the same quantity of workers as the purely competitive firm.

Question 5

Which of the following factors is not relevant in explaining the persistence of wage differentials?

Accepted Answer

A)  labor immobility 
B)  compensating differences 
C)  free public education 
D)  noncompeting groups 
A)  labor immobility 
B)  compensating differences 
C)  free public education 
D)  noncompeting groups

Question 6

An industry would be likely to lay off workers following

Accepted Answer

A)  an increase in the price of the firm's product. 
B)  an increase in the marginal revenue product of labor. 
C)  the imposition of a new minimum wage below the current equilibrium wage. 
D)  an industrial union's push of wages above the MRP of labor. 
A)  an increase in the price of the firm's product. 
B)  an increase in the marginal revenue product of labor. 
C)  the imposition of a new minimum wage below the current equilibrium wage. 
D)  an industrial union's push of wages above the MRP of labor.

Question 7

What concept is associated with the notion that employers can get greater effort from workers by paying them a relatively high, above-equilibrium wage?

Accepted Answer

A)  profit sharing 
B)  efficiency wages 
C)  piece-rate wages 
D)  bonus or commissions 
A)  profit sharing 
B)  efficiency wages 
C)  piece-rate wages 
D)  bonus or commissions

Question 8

A monopsonist faces an upsloping supply curve of labor, but it could face a horizontal demand curve for its product in the output market.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is an explanation for the high labor-productivity in the United States?

Accepted Answer

A)  plentiful capital resources 
B)  high total output in industries 
C)  high price of labor 
D)  plentiful labor resources 
A)  plentiful capital resources 
B)  high total output in industries 
C)  high price of labor 
D)  plentiful labor resources

Question 10

The idea of compensating differences is used

Accepted Answer

A)  by inclusive unions as an argument in bargaining for wage rate increases. 
B)  to justify the application of minimum wages to low-wage labor markets. 
C)  to explain the divergence between wage rates and marginal resource cost. 
D)  to explain wage rate differences based on differing nonmonetary aspects of jobs. 
A)  by inclusive unions as an argument in bargaining for wage rate increases. 
B)  to justify the application of minimum wages to low-wage labor markets. 
C)  to explain the divergence between wage rates and marginal resource cost. 
D)  to explain wage rate differences based on differing nonmonetary aspects of jobs.

Question 11

In which of the following U.S. occupations is the rate of unionization the highest?

Accepted Answer

A)  protective services 
B)  sales workers 
C)  managers 
D)  transportation workers 
A)  protective services 
B)  sales workers 
C)  managers 
D)  transportation workers

Question 12

Available research suggests that the union wage advantage diminishes the national output by

Accepted Answer

A)  15 percent. 
B)  8 percent. 
C)  3 percent. 
D)  less than 1 percent. 
A)  15 percent. 
B)  8 percent. 
C)  3 percent. 
D)  less than 1 percent.

Question 13

The principal-agent problem arises in labor markets because

Accepted Answer

A)  a firm may realize excessively large profits. 
B)  workers may provide less-than-expected work effort. 
C)  compensating wage differences do not pay for differences in the nonmonetary aspects of jobs. 
D)  human capital investments vary among workers. 
A)  a firm may realize excessively large profits. 
B)  workers may provide less-than-expected work effort. 
C)  compensating wage differences do not pay for differences in the nonmonetary aspects of jobs. 
D)  human capital investments vary among workers.

Question 14

Suppose in some economy there are 100 million workers; 8 million of those workers work in retail trade, and 2 million of the retail workers belong to unions. Total union membership in this economy is 30 million. The rate of unionization in the economy is

Accepted Answer

A)  30 percent, and the rate of unionization in retail trade in 20 percent. 
B)  8 percent, and the rate of unionization in retail trade is 2 percent. 
C)  30 percent, and the rate of unionization in retail trade is 25 percent. 
D)  20 percent, and the rate of unionization in retail trade is 25 percent. 
A)  30 percent, and the rate of unionization in retail trade in 20 percent. 
B)  8 percent, and the rate of unionization in retail trade is 2 percent. 
C)  30 percent, and the rate of unionization in retail trade is 25 percent. 
D)  20 percent, and the rate of unionization in retail trade is 25 percent.

Question 15

Empirical studies suggest that, other things equal, the smaller the number of hospitals in a city, the lower are nurses' wages. This is evidence that

Accepted Answer

A)  the labor markets of nurses are purely competitive. 
B)  hospitals may possess some degree of monopsony power. 
C)  the minimum wage does not apply to nurses. 
D)  labor unions have been ineffective in increasing the wages of nurses. 
A)  the labor markets of nurses are purely competitive. 
B)  hospitals may possess some degree of monopsony power. 
C)  the minimum wage does not apply to nurses. 
D)  labor unions have been ineffective in increasing the wages of nurses.

Question 16

Incentive pay plans that seek to tie worker compensation more closely to worker performance include the following, except

Accepted Answer

A)  commissions or royalties. 
B)  a seniority-based pay scale. 
C)  stock options and profit-sharing. 
D)  efficiency wages. 
A)  commissions or royalties. 
B)  a seniority-based pay scale. 
C)  stock options and profit-sharing. 
D)  efficiency wages.

Question 17

African Americans have higher unionization rates than whites.

Accepted Answer

A) True 
 B)False

Question 18

Nominal wage measures the purchasing power of a given amount of real wage.

Accepted Answer

A) True 
 B)False

Question 19

A monopsonistic employer

Accepted Answer

A)  has a perfectly elastic labor supply curve. 
B)  is necessarily a monopolist in the product market. 
C)  faces a marginal resource (labor) cost that is greater than the wage rate. 
D)  faces a marginal resource (labor) cost that is less than the wage rate. 
A)  has a perfectly elastic labor supply curve. 
B)  is necessarily a monopolist in the product market. 
C)  faces a marginal resource (labor) cost that is greater than the wage rate. 
D)  faces a marginal resource (labor) cost that is less than the wage rate.

Question 20

Marginal resource cost refers to the

Accepted Answer

A)  increase in total revenue resulting from the sale of the extra output of one more worker. 
B)  price at which additional units of a resource can be hired in an imperfectly competitive resource market. 
C)  increase in total cost resulting from producing one more unit of output. 
D)  amount by which a firm's total resource cost increases as the result of hiring one more unit of the resource. 
A)  increase in total revenue resulting from the sale of the extra output of one more worker. 
B)  price at which additional units of a resource can be hired in an imperfectly competitive resource market. 
C)  increase in total cost resulting from producing one more unit of output. 
D)  amount by which a firm's total resource cost increases as the result of hiring one more unit of the resource.

Exam 17: Wage Determination

A firm hiring labor in a perfectly competitive labor market faces a

Unions prefer agency shops to open shops.

Which one of the following research findings is most consistent with the hypothesis that unions increase productivity?

Compared to a purely competitive firm, a monopsonist will pay

Which of the following factors is not relevant in explaining the persistence of wage differentials?

An industry would be likely to lay off workers following

What concept is associated with the notion that employers can get greater effort from workers by paying them a relatively high, above-equilibrium wage?

A monopsonist faces an upsloping supply curve of labor, but it could face a horizontal demand curve for its product in the output market.

Which of the following is an explanation for the high labor-productivity in the United States?

The idea of compensating differences is used

In which of the following U.S. occupations is the rate of unionization the highest?

Available research suggests that the union wage advantage diminishes the national output by

The principal-agent problem arises in labor markets because

Suppose in some economy there are 100 million workers; 8 million of those workers work in retail trade, and 2 million of the retail workers belong to unions. Total union membership in this economy is 30 million. The rate of unionization in the economy is

Empirical studies suggest that, other things equal, the smaller the number of hospitals in a city, the lower are nurses' wages. This is evidence that

Incentive pay plans that seek to tie worker compensation more closely to worker performance include the following, except

African Americans have higher unionization rates than whites.

Nominal wage measures the purchasing power of a given amount of real wage.

A monopsonistic employer

Marginal resource cost refers to the

Limits, Alternatives, and Choices

The Market System and the Circular Flow

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