Question 1

Which of the following is TRUE?

Accepted Answer

A)  The main reason why wages are high in some countries is the existence of unions in those countries. 
B)  The wages in unionized jobs tend to be lower than the wages in nonunionized jobs. 
C)  Unions increase the supply of labor and increase wages as a result. 
D)  Unions raise wages for some workers and lower wages for other workers. 
A)  The main reason why wages are high in some countries is the existence of unions in those countries. 
B)  The wages in unionized jobs tend to be lower than the wages in nonunionized jobs. 
C)  Unions increase the supply of labor and increase wages as a result. 
D)  Unions raise wages for some workers and lower wages for other workers.

Question 2

Unions raise wages by decreasing employment in the unionized industry.

Accepted Answer

A) True 
 B)False

Question 3

A janitor in the United States earns about $10 per hour while a typical janitor in India earns less than $1 per hour.

Accepted Answer

A) True 
 B)False

Question 4

Unions may ________ the wages of their members but they might ________ the wages of everyone else.

Accepted Answer

A)  increase; also increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; also decrease 
A)  increase; also increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; also decrease

Question 5

The general rule of hiring workers is to hire:

Accepted Answer

A)  workers if their marginal product of labor is less than or equal to the wage. 
B)  workers if they contribute more to the firms' revenues than the firm's costs. 
C)  educated workers before noneducated workers. 
D)  the most productive workers, regardless of the wage. 
A)  workers if their marginal product of labor is less than or equal to the wage. 
B)  workers if they contribute more to the firms' revenues than the firm's costs. 
C)  educated workers before noneducated workers. 
D)  the most productive workers, regardless of the wage.

Question 6

Which of the following statements is TRUE?
I. Statistical discrimination is based on ill will toward a group because of their race, sex, nationality, or religion.
II. Statistical discrimination is judging people by the averages of the groups to which they belong.
III. As better ways of judging people develop, the merit of using statistical discrimination rises.

Accepted Answer

A)  I and III only 
B)  II only 
C)  I and II only 
D)  I only 
A)  I and III only 
B)  II only 
C)  I and II only 
D)  I only

Question 7

Imagine that you could travel back in time to another era, bringing with you all the knowledge you have from the modern age. Your wage in the older era might be higher because people with your knowledge were in short supply then. But why might your wage also be lower?

Accepted Answer

A)  because in bygone eras the economy was less productive overall 
B)  no one would believe that you were from the future 
C)  because in bygone eras, economics had not been invented yet 
D)  because in bygone eras, people were more productive than they are today 
A)  because in bygone eras the economy was less productive overall 
B)  no one would believe that you were from the future 
C)  because in bygone eras, economics had not been invented yet 
D)  because in bygone eras, people were more productive than they are today

Question 8

Which of the following statements is TRUE?

Accepted Answer

A)  Unions increase the wages of union workers at the expense of lower wages for nonunion workers. 
B)  Wages are high in the United States because there is a large presence of unionized workers. 
C)  The American Medical Association, unlike industrial unions, uses supply restrictions to increase the wages of its profession. 
D)  Britain's long period of economic prosperity from 1970 to 1982 resulted from rising unionization rates. 
A)  Unions increase the wages of union workers at the expense of lower wages for nonunion workers. 
B)  Wages are high in the United States because there is a large presence of unionized workers. 
C)  The American Medical Association, unlike industrial unions, uses supply restrictions to increase the wages of its profession. 
D)  Britain's long period of economic prosperity from 1970 to 1982 resulted from rising unionization rates.

Question 9

Clark starts a coffee shop and begins hiring employees. The first employee's marginal product of labor (MPL) is $128 an hour and the MPL for each employee beyond the first adds half of the previous employee's ($64 for the second, $32 for the third, etc.). If the market wage for employees is $7 an hour, how many employees should Clark hire?

Accepted Answer

A)  4 
B)  5 
C)  6 
D)  7 
A)  4 
B)  5 
C)  6 
D)  7

Question 10

Which of the following types of discrimination tends to break down most easily?

Accepted Answer

A)  discrimination by employees 
B)  discrimination by employers 
C)  discrimination by government 
D)  discrimination by culture 
A)  discrimination by employees 
B)  discrimination by employers 
C)  discrimination by government 
D)  discrimination by culture

Question 11

We often think of technology and labor as substitutes for each other, but technology can lead to the hiring of more labor if it:

Accepted Answer

A)  decreases the average total cost of production. 
B)  decreases the compensating differential. 
C)  increases the marginal product of labor. 
D)  increases the opportunity cost of labor. 
A)  decreases the average total cost of production. 
B)  decreases the compensating differential. 
C)  increases the marginal product of labor. 
D)  increases the opportunity cost of labor.

Question 12

Aside from your skills and how hard you work, what does your marginal product of labor reflect?

Accepted Answer

A)  your supply of labor 
B)  the productivity of everyone else in your economy 
C)  your chance of death on the job 
D)  nothing 
A)  your supply of labor 
B)  the productivity of everyone else in your economy 
C)  your chance of death on the job 
D)  nothing

Question 13

A union can raise wages by:

Accepted Answer

A)  increasing the demand for labor. 
B)  reducing the supply of labor. 
C)  promoting a smoother labor market. 
D)  demanding better working conditions. 
A)  increasing the demand for labor. 
B)  reducing the supply of labor. 
C)  promoting a smoother labor market. 
D)  demanding better working conditions.

Question 14

Figure: Cleaners' Wages   Refer to the figure. How many workers will this firm hire at a wage of $29?

Accepted Answer

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

Question 15

An individual's labor supply curve:

Accepted Answer

A)  may be backward bending if the wage is high enough. 
B)  is always upward sloping. 
C)  is typically vertical. 
D)  is identical to the market labor supply curve. 
A)  may be backward bending if the wage is high enough. 
B)  is always upward sloping. 
C)  is typically vertical. 
D)  is identical to the market labor supply curve.

Question 16

When labor demand decreases, the wage is expected to:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  change in an indeterminate direction. 
A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  change in an indeterminate direction.

Question 17

There are two major theories of why education leads to higher earnings (though they are not mutually exclusive): signaling and the building of labor market issues. If the signaling theory is dominant, how would the average wage for college graduates change if everyone received a college degree?

Accepted Answer

A)  It would increase because the marginal product of labor would increase. 
B)  It would increase because more people would be identified as hard working. 
C)  It would decrease because it would be more difficult to differentiate workers. 
D)  It would decrease because most of what you learn in college does not make you more productive. 
A)  It would increase because the marginal product of labor would increase. 
B)  It would increase because more people would be identified as hard working. 
C)  It would decrease because it would be more difficult to differentiate workers. 
D)  It would decrease because most of what you learn in college does not make you more productive.

Question 18

Janitors in India might make $1,000 per year, while they could easily earn $20,000 per year in the United States. How is this a forgone gain from trade?

Accepted Answer

A)  Indian janitors are less concerned with earning a high wage than are American janitors. 
B)  The United States is a cleaner country than India, so it has less use for janitors. 
C)  Total surplus would be higher if the Indian janitors could come to the United States to work. 
D)  Total surplus would be higher if American janitors could go to India to work. 
A)  Indian janitors are less concerned with earning a high wage than are American janitors. 
B)  The United States is a cleaner country than India, so it has less use for janitors. 
C)  Total surplus would be higher if the Indian janitors could come to the United States to work. 
D)  Total surplus would be higher if American janitors could go to India to work.

Question 19

In economic development, "brain drain" refers to the tendency of a developing country's most skilled workers leaving to work in a wealthy country. Why can skilled foreign workers from poor countries make so much more money in wealthy countries?

Accepted Answer

A)  because there are many skilled workers in poor countries 
B)  because the demand for skilled workers is higher in wealthy countries 
C)  because the marginal product of labor of skilled workers is high in poor countries 
D)  because the foreign workers must be compensated since employers know the worker will want to send a large chunk of her earnings to her family 
A)  because there are many skilled workers in poor countries 
B)  because the demand for skilled workers is higher in wealthy countries 
C)  because the marginal product of labor of skilled workers is high in poor countries 
D)  because the foreign workers must be compensated since employers know the worker will want to send a large chunk of her earnings to her family

Question 20

If higher wages give the incentive for some workers to work fewer hours:

Accepted Answer

A)  the quantity of labor supplied in the market will fall. 
B)  the quantity of labor supplied in the market will still rise as new workers enter the market. 
C)  the MPL will fall. 
D)  the demand for workers will rise. 
A)  the quantity of labor supplied in the market will fall. 
B)  the quantity of labor supplied in the market will still rise as new workers enter the market. 
C)  the MPL will fall. 
D)  the demand for workers will rise.

Exam 18: Labor Markets

Which of the following is TRUE?

Unions raise wages by decreasing employment in the unionized industry.

A janitor in the United States earns about $10 per hour while a typical janitor in India earns less than $1 per hour.

Unions may ________ the wages of their members but they might ________ the wages of everyone else.

The general rule of hiring workers is to hire:

Imagine that you could travel back in time to another era, bringing with you all the knowledge you have from the modern age. Your wage in the older era might be higher because people with your knowledge were in short supply then. But why might your wage also be lower?

Which of the following statements is TRUE?

Which of the following types of discrimination tends to break down most easily?

We often think of technology and labor as substitutes for each other, but technology can lead to the hiring of more labor if it:

Aside from your skills and how hard you work, what does your marginal product of labor reflect?

A union can raise wages by:

Figure: Cleaners' Wages Refer to the figure. How many workers will this firm hire at a wage of $29?

An individual's labor supply curve:

When labor demand decreases, the wage is expected to:

There are two major theories of why education leads to higher earnings (though they are not mutually exclusive): signaling and the building of labor market issues. If the signaling theory is dominant, how would the average wage for college graduates change if everyone received a college degree?

Janitors in India might make $1,000 per year, while they could easily earn $20,000 per year in the United States. How is this a forgone gain from trade?

In economic development, "brain drain" refers to the tendency of a developing country's most skilled workers leaving to work in a wealthy country. Why can skilled foreign workers from poor countries make so much more money in wealthy countries?

If higher wages give the incentive for some workers to work fewer hours:

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters

Unions may the wages of their members but they might the wages of everyone else.