Question 1

Assume that skilled labor and energy are substitutes in production. An increase in energy prices is then predicted to:

Accepted Answer

A) unambiguously increase the demand for skilled labor 
B) unambiguously decrease the demand for skilled labor 
C) increase the demand for skilled labor if the output effect outweighs the substitution effect 
D) decrease the demand for skilled labor if the output effect outweighs the substitution effect 
A) unambiguously increase the demand for skilled labor 
B) unambiguously decrease the demand for skilled labor 
C) increase the demand for skilled labor if the output effect outweighs the substitution effect 
D) decrease the demand for skilled labor if the output effect outweighs the substitution effect

Question 2

The long-run labor demand curve incorporates:

Accepted Answer

A) the substitution effect only 
B) the output effect only 
C) neither the substitution effect nor the output effect 
D) both the substitution effect and the output effect 
A) the substitution effect only 
B) the output effect only 
C) neither the substitution effect nor the output effect 
D) both the substitution effect and the output effect

Question 3

Which of the following best describes the substitution effect of a wage increase?

Accepted Answer

A) The firm's marginal cost increases,the firm desires to produce less output,and therefore less labor is required 
B) The cost of labor is relatively higher,causing the firm to use relatively less labor 
C) The firm's labor demand curve becomes less elastic,causing it to employ less labor 
D) The firm's labor demand curve becomes more elastic,causing it to employ less labor 
A) The firm's marginal cost increases,the firm desires to produce less output,and therefore less labor is required 
B) The cost of labor is relatively higher,causing the firm to use relatively less labor 
C) The firm's labor demand curve becomes less elastic,causing it to employ less labor 
D) The firm's labor demand curve becomes more elastic,causing it to employ less labor

Question 4

In which industries does the Bureau of Labor Statistics project the fastest employment growth over the next ten years?

Accepted Answer

A) Real estate and finance 
B) Fast food preparation and legal services 
C) Maintenance and law enforcement 
D) Health care and computers 
A) Real estate and finance 
B) Fast food preparation and legal services 
C) Maintenance and law enforcement 
D) Health care and computers

Question 5

Questions  are based on the data in the following table. Assume that the labor market is perfectly competitive.

$\begin{array}{cc}
\begin{array}{cc}
\text { Labor } & \text { Output } \
\hline
0& 0 \
1 & 15 \
2 & 29 \
3 & 42 \
4 & 54 \
5 & 65 \
6 & 75
\end{array}
\begin{array}{c}
\text { Price }\left(D_{1}\right) \
\hline
\$ 10.00 \
10.00 \
10.00 \
10.00 \
10.00 \
10.00 \
10.00 \
\end{array}
\begin{array}{c}
\text { Price }\left(\mathrm{D}_{2}\right) \
\hline \$ 10.00 \
9.50 \
9.00 \
8.50 \
7.50 \
6.50 \
5.50
\end{array}
\end{array}$
-Suppose the firm's product demand is given by the column labeled D2.If the wage rate rises from $100 to $130,the firm will reduce the quantity of labor employed by _____ unit(s).

Accepted Answer

A) 0 
B) 1 
C) 2 
D) 3 
A) 0 
B) 1 
C) 2 
D) 3

Question 6

Suppose that the decline in prices of personal computers has reduced the demand for labor at a particular firm.We may conclude that at this firm:

Accepted Answer

A) computers and labor are pure complements 
B) computers and labor are gross complements but not pure complements 
C) computers and labor are gross substitutes 
D) computers and labor are perfect substitutes 
A) computers and labor are pure complements 
B) computers and labor are gross complements but not pure complements 
C) computers and labor are gross substitutes 
D) computers and labor are perfect substitutes

Question 7

Which of the following best describes the output effect of a wage increase?

Accepted Answer

A) The firm's marginal cost increases,the firm desires to produce less output,and therefore less labor is required 
B) The cost of labor is relatively higher,causing the firm to use relatively less labor 
C) The firm's marginal cost falls,the firm desires to produce more output,and therefore more labor is required 
D) The firm's labor demand curve becomes more inelastic,causing it to employ less labor 
A) The firm's marginal cost increases,the firm desires to produce less output,and therefore less labor is required 
B) The cost of labor is relatively higher,causing the firm to use relatively less labor 
C) The firm's marginal cost falls,the firm desires to produce more output,and therefore more labor is required 
D) The firm's labor demand curve becomes more inelastic,causing it to employ less labor

Question 8

In the long run,the substitution effect of a lower wage:

Accepted Answer

A) increases the quantity of labor demanded,while the output effect reduces it 
B) decreases the quantity of labor demanded,while the output effect increases it 
C) and the output effect both increase the quantity of labor demanded 
D) and the output effect both reduce the quantity of labor demanded 
A) increases the quantity of labor demanded,while the output effect reduces it 
B) decreases the quantity of labor demanded,while the output effect increases it 
C) and the output effect both increase the quantity of labor demanded 
D) and the output effect both reduce the quantity of labor demanded

Question 9

Suppose that,as a result of an increase in the market supply of labor,the wage rate has fallen 10%.After adjusting its employment levels,a firm finds its total wage bill has decreased.This occurrence indicates that the firm's labor demand:

Accepted Answer

A) is inelastic over this range of wages 
B) is elastic over this range of wages 
C) is unit elastic over this range of wages 
D) was inelastic at the old wage,but is elastic at the new,lower wage 
A) is inelastic over this range of wages 
B) is elastic over this range of wages 
C) is unit elastic over this range of wages 
D) was inelastic at the old wage,but is elastic at the new,lower wage

Question 10

Which of the following can be predicted to increase the demand for labor?

Accepted Answer

A) An increase in the price of a gross complement to labor 
B) A decrease in the price of a gross substitute for labor 
C) A decrease in the number of firms 
D) An increase in product demand 
A) An increase in the price of a gross complement to labor 
B) A decrease in the price of a gross substitute for labor 
C) A decrease in the number of firms 
D) An increase in product demand

Question 11

Compared to an otherwise identical competitive firm,a firm with monopoly power will hire:

Accepted Answer

A) fewer workers,reflecting its decision to produce less output 
B) more workers because the higher price charged by the monopoly raises its MRP 
C) fewer workers because workers are less productive in a monopoly setting 
D) more workers because monopolies have higher profits and can pay higher wages 
A) fewer workers,reflecting its decision to produce less output 
B) more workers because the higher price charged by the monopoly raises its MRP 
C) fewer workers because workers are less productive in a monopoly setting 
D) more workers because monopolies have higher profits and can pay higher wages

Question 12

Questions  are based on the data in the following table. Assume that the labor market is perfectly competitive.

$\begin{array}{cc}
\begin{array}{cc}
\underline{\text { Labor }} & \underline{\text { Output }} \
0 & 0 \
1 & 15 \
2 & 29 \
3 & 42 \
4 & 54 \
5 & 65
\end{array}
\begin{array}{r}
\underline{\text { Price }} \
\$ 2.20 \
2.00 \
1.80 \
1.60 \
1.40 \
1.20
\end{array}
\end{array}$

-If the wage is $20.00,how many workers will this profit-maximizing firm choose to employ?

Accepted Answer

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

Question 13

If energy and unskilled labor are gross complements,an increase in the price of energy will:

Accepted Answer

A) increase the supply of unskilled labor,decreasing the unskilled wage 
B) increase the demand for unskilled labor,raising the unskilled wage 
C) decrease the demand for unskilled labor,decreasing the unskilled wage 
D) either increase or decrease the demand for unskilled labor,depending on the relative strengths of the output effect and the substitution effect 
A) increase the supply of unskilled labor,decreasing the unskilled wage 
B) increase the demand for unskilled labor,raising the unskilled wage 
C) decrease the demand for unskilled labor,decreasing the unskilled wage 
D) either increase or decrease the demand for unskilled labor,depending on the relative strengths of the output effect and the substitution effect

Question 14

Suppose that,as a result of a decrease in the market supply of labor,the wage rate has risen 10%.After adjusting its employment level,a firm finds its total wage bill has decreased.This occurrence indicates that the firm's labor demand:

Accepted Answer

A) is inelastic over this range of wages 
B) is elastic over this range of wages 
C) is unit elastic over this range of wages 
D) was inelastic at the old wage,but is elastic at the new,higher wage 
A) is inelastic over this range of wages 
B) is elastic over this range of wages 
C) is unit elastic over this range of wages 
D) was inelastic at the old wage,but is elastic at the new,higher wage

Question 15

Questions  are based on the data in the following table. Assume that the labor market is perfectly competitive.

$\begin{array}{cc}
\begin{array}{cc}
\underline{\text { Labor }} & \underline{\text { Output }} \
0 & 0 \
1 & 15 \
2 & 29 \
3 & 42 \
4 & 54 \
5 & 65
\end{array}
\begin{array}{r}
\underline{\text { Price }} \
\$ 2.20 \
2.00 \
1.80 \
1.60 \
1.40 \
1.20
\end{array}
\end{array}$

-Rather than the product demand schedule shown in the table,suppose this firm sold its output competitively for a price of $2.00.In this case,how many workers will this profit-maximizing firm choose to employ at a wage of $25.00?

Accepted Answer

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

Question 16

are based on the short-run production function in the graph at right.

-For labor input levels between X and Y:

Accepted Answer

A) the marginal product of labor is falling,but is greater than the average product of labor 
B) both the marginal product and the average product of labor are falling 
C) the marginal product of labor is rising and the average product of labor is falling 
D) both the marginal product and the average product of labor are rising 
A) the marginal product of labor is falling,but is greater than the average product of labor 
B) both the marginal product and the average product of labor are falling 
C) the marginal product of labor is rising and the average product of labor is falling 
D) both the marginal product and the average product of labor are rising

Question 17

Questions  are based on the data in the following table. Assume that the labor market is perfectly competitive.

$\begin{array}{cc}
\begin{array}{cc}
\text { Labor } & \text { Output } \
\hline
0& 0 \
1 & 15 \
2 & 29 \
3 & 42 \
4 & 54 \
5 & 65 \
6 & 75
\end{array}
\begin{array}{c}
\text { Price }\left(D_{1}\right) \
\hline
\$ 10.00 \
10.00 \
10.00 \
10.00 \
10.00 \
10.00 \
10.00 \
\end{array}
\begin{array}{c}
\text { Price }\left(\mathrm{D}_{2}\right) \
\hline \$ 10.00 \
9.50 \
9.00 \
8.50 \
7.50 \
6.50 \
5.50
\end{array}
\end{array}$
-Suppose the firm's product demand is given by the column labeled D2.The extra revenue generated by the fourth worker is:

Accepted Answer

A) $1 
B) $12 
C) $48 
D) $405 
A) $1 
B) $12 
C) $48 
D) $405

Question 18

"The extra output,measured in dollars,that accrues to society when an additional unit of labor is employed" best describes:

Accepted Answer

A) marginal product 
B) marginal revenue product 
C) value of marginal product 
D) total revenue product 
A) marginal product 
B) marginal revenue product 
C) value of marginal product 
D) total revenue product

Question 19

Which of the following best describes the substitution effect of a wage decrease?

Accepted Answer

A) The firm's marginal cost decreases,the firm desires to produce less output,and therefore less labor is required 
B) The cost of labor is relatively lower,causing the firm to use relatively more labor 
C) The firm's labor demand curve less elastic,causing it to employ less labor 
D) The firm's labor demand curve becomes more inelastic,causing it to employ less labor 
A) The firm's marginal cost decreases,the firm desires to produce less output,and therefore less labor is required 
B) The cost of labor is relatively lower,causing the firm to use relatively more labor 
C) The firm's labor demand curve less elastic,causing it to employ less labor 
D) The firm's labor demand curve becomes more inelastic,causing it to employ less labor

Question 20

are based on the short-run production function in the graph at right.

-The slope of line segment 0D can be interpreted as the:

Accepted Answer

A) marginal product of labor at Y 
B) total product of labor over the range 0Y 
C) value of labor's marginal product at Y 
D) the greatest possible total product of labor 
A) marginal product of labor at Y 
B) total product of labor over the range 0Y 
C) value of labor's marginal product at Y 
D) the greatest possible total product of labor

Assume that skilled labor and energy are substitutes in production. An increase in energy prices is then predicted to:

The long-run labor demand curve incorporates:

Which of the following best describes the substitution effect of a wage increase?

In which industries does the Bureau of Labor Statistics project the fastest employment growth over the next ten years?

Suppose that the decline in prices of personal computers has reduced the demand for labor at a particular firm.We may conclude that at this firm:

Which of the following best describes the output effect of a wage increase?

In the long run,the substitution effect of a lower wage:

Suppose that,as a result of an increase in the market supply of labor,the wage rate has fallen 10%.After adjusting its employment levels,a firm finds its total wage bill has decreased.This occurrence indicates that the firm's labor demand:

Which of the following can be predicted to increase the demand for labor?

Compared to an otherwise identical competitive firm,a firm with monopoly power will hire:

Questions are based on the data in the following table. Assume that the labor market is perfectly competitive. 0 0 1 15 2 29 3 42 4 54 5 65 \ 2.20 2.00 1.80 1.60 1.40 1.20 -If the wage is $20.00,how many workers will this profit-maximizing firm choose to employ?

If energy and unskilled labor are gross complements,an increase in the price of energy will:

Suppose that,as a result of a decrease in the market supply of labor,the wage rate has risen 10%.After adjusting its employment level,a firm finds its total wage bill has decreased.This occurrence indicates that the firm's labor demand:

are based on the short-run production function in the graph at right. -For labor input levels between X and Y:

"The extra output,measured in dollars,that accrues to society when an additional unit of labor is employed" best describes:

Which of the following best describes the substitution effect of a wage decrease?

are based on the short-run production function in the graph at right. -The slope of line segment 0D can be interpreted as the:

Labor Economics: Introduction and Overview

The Theory of Individual Labor Supply

Population, Participation Rates, and Hours of Work

Labor Quality: Investing in Human Capital

Wage Determination and the Allocation of Labor

Alternative Pay Schemes and Labor Efficiency

The Wage Structure

Mobility,Migration,and Efficiency

Labor Unions and Collective Bargaining

The Economic Impact of Unions

Government and the Labor Market: Employment, Expenditures, and Taxation

Government and the Labor Market: Legislation and Regulation

Labor Market Discrimination

Job Search: External and Internal

The Distribution of Personal Earnings

Labor Productivity: Wages,Prices,and Employment

Employment and Unemployment

Filters

Exam 5: The Demand for Labor

Assume that skilled labor and energy are substitutes in production. An increase in energy prices is then predicted to:

The long-run labor demand curve incorporates:

Which of the following best describes the substitution effect of a wage increase?

In which industries does the Bureau of Labor Statistics project the fastest employment growth over the next ten years?

Suppose that the decline in prices of personal computers has reduced the demand for labor at a particular firm.We may conclude that at this firm:

Which of the following best describes the output effect of a wage increase?

In the long run,the substitution effect of a lower wage:

Suppose that,as a result of an increase in the market supply of labor,the wage rate has fallen 10%.After adjusting its employment levels,a firm finds its total wage bill has decreased.This occurrence indicates that the firm's labor demand:

Which of the following can be predicted to increase the demand for labor?

Compared to an otherwise identical competitive firm,a firm with monopoly power will hire:

Questions are based on the data in the following table. Assume that the labor market is perfectly competitive. 0 0 1 15 2 29 3 42 4 54 5 65 \ 2.20 2.00 1.80 1.60 1.40 1.20 -If the wage is $20.00,how many workers will this profit-maximizing firm choose to employ?

If energy and unskilled labor are gross complements,an increase in the price of energy will:

Suppose that,as a result of a decrease in the market supply of labor,the wage rate has risen 10%.After adjusting its employment level,a firm finds its total wage bill has decreased.This occurrence indicates that the firm's labor demand:

are based on the short-run production function in the graph at right. -For labor input levels between X and Y:

"The extra output,measured in dollars,that accrues to society when an additional unit of labor is employed" best describes:

Which of the following best describes the substitution effect of a wage decrease?

are based on the short-run production function in the graph at right. -The slope of line segment 0D can be interpreted as the:

Labor Economics: Introduction and Overview

The Theory of Individual Labor Supply

Population, Participation Rates, and Hours of Work

Labor Quality: Investing in Human Capital

Wage Determination and the Allocation of Labor

Alternative Pay Schemes and Labor Efficiency

The Wage Structure

Mobility,Migration,and Efficiency

Labor Unions and Collective Bargaining

The Economic Impact of Unions

Government and the Labor Market: Employment, Expenditures, and Taxation

Government and the Labor Market: Legislation and Regulation

Labor Market Discrimination

Job Search: External and Internal

The Distribution of Personal Earnings

Labor Productivity: Wages,Prices,and Employment

Employment and Unemployment

Filters