Question 1

What is a compensating differential?

Accepted Answer

The answer of What is a compensating differential?...

Question 2

A monopsony restricts the quantity of a factor demanded to force down the price of the factor and increase profits.

Accepted Answer

A) True 
 B)False

Question 3

The most important factor contributing to wage differences in the labor market is differences in the level of education and training among workers.

Accepted Answer

A) True 
 B)False

Question 4

Workers who dislike risk

Accepted Answer

A)  prefer to be paid monthly rather than weekly or daily. 
B)  prefer a piece-rate compensation system to a salary system. 
C)  prefer a salary system to a commission compensation system. 
D)  prefer to be paid a salary rather than a wage.

Question 5

The labor market in Major League Baseball features

Accepted Answer

A)  a monopoly by the League in employing professional baseball players that is offset by the players' membership in a labor union. 
B)  a monopsony by the League in employing professional baseball players that is offset by the players' membership in a labor union. 
C)  an oligopoly by the League in employing professional baseball players that is offset by an oligopsony by the players in the labor market. 
D)  monopolistic competition between the teams and professional baseball players.

Question 6

A firm might prefer a commission system of compensation when the nature of the work is repetitive and monotonous and can be performed by an individual.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not held constant along a firm's demand curve for labor?

Accepted Answer

A)  the quantity of other inputs used by the firm 
B)  the wage rate 
C)  changes in technology 
D)  the price of the product produced by the firm

Question 8

The marginal revenue product of labor is defined as

Accepted Answer

A)  the change in the firm's revenue as a result of selling one more unit of output. 
B)  the change in the firm's output as a result of hiring one more worker. 
C)  the change in the firm's profit as a result of hiring one more worker. 
D)  the change in the firm's revenue as a result of hiring one more worker.

Question 9

Figure 17-3 
-Refer to Figure 17-3. Which of the panels in the diagram best represents an individual's labor supply curve?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D

Question 10

Major League Baseball teams are similar to other firms in that they use factors of production to produce a product (baseball games). An example of capital used by teams to produce their products is

Accepted Answer

A)  the money teams earn from television contracts and ticket sales. 
B)  the land on which baseball games are played. 
C)  the labor of baseball players. 
D)  the ballparks where the games are played.

Question 11

All of the following will shift the labor supply curve except

Accepted Answer

A)  an increase in labor force participation rate among women. 
B)  an increase in the average age of retirement. 
C)  an increase in the wage rate. 
D)  a change in a country's immigration policy.

Question 12

Some superstar athletes in the sports industry earn very high levels of income relative to other occupations, and over time the wage differential has been increasing. What could have caused this?

Accepted Answer

A)  The supply of star athletes has decreased. 
B)  The supply of star athletes has increased due to college athletic programs. 
C)  Technological advances such as cable television has increased the demand for sports entertainment. 
D)  The market power of athletes' unions has decreased.

Question 13

In a study conducted by Marianne Bertrand and Sendhil Mullianthan, identical resumes were sent in response to help wanted ads in newspapers, with half of the resumes assigned an African-American-sounding name and half assigned a white-sounding name. The study found that

Accepted Answer

A)  employers were equally likely to interview workers with white-sounding names and with African-American-sounding names. 
B)  employers were 50 percent more likely to interview workers with African-American-sounding names. 
C)  employers were 50 percent more likely to interview workers with white-sounding names. 
D)  no employers chose to interview workers with African-American-sounding names.

Question 14

Figure 17-5 
-Refer to Figure 17-5 to answer the following questions.
a. What is the equilibrium quantity of firefighters hired, and what is the equilibrium wage?
b. What is the equilibrium quantity of paralegals hired, and what is the equilibrium wage?
c. Explain why firefighters might earn a higher weekly wage than paralegals.
d. Suppose that comparable worth legislation is passed, and the government requires that firefighters and paralegals be paid the same wage, $800 per week. Now how many firefighters will be hired and how many paralegals will be hired?

Accepted Answer

The answer of Figure 17-5 
-Refer to Figure 17-5 to...

Question 15

The marginal productivity theory of income distribution implies that in a perfectly competitive market economy, a worker will receive income

Accepted Answer

A)  equal to the value of her marginal contribution to the production process. 
B)  that is greater than the value of her marginal contribution to the production process. 
C)  that is less than the value of her marginal contribution to the production process. 
D)  greater than, less than, or equal to the value of her marginal contribution to the production process, depending on her ability to negotiate with employers.

Question 16

Suppose a competitive firm is paying a wage of $12 an hour and sells its product at $3 per unit. Assume that labor is the only input. If hiring another worker would increase output by three units per hour, then to maximize profits the firm should

Accepted Answer

A)  not change the number of workers it currently hires. 
B)  not hire an additional worker. 
C)  hire another worker. 
D)  There is not enough information to answer the question.

Question 17

Comparable worth legislation

Accepted Answer

A)  will eliminate the earnings gap between men and women. 
B)  mandates that employers pay the same wages to workers, regardless of their gender, for jobs that have comparable worth. 
C)  mandates that potential employers demonstrate that they are worth the wages they expect to earn. 
D)  guide markets toward the economically efficient wage.

Question 18

Economic rent refers to the price of a factor of production which is fixed in supply.

Accepted Answer

A) True 
 B)False

Question 19

What is the difference between labor's marginal product and marginal revenue product?

Accepted Answer

A)  The marginal product of labor is the increase in output as a result of hiring an additional worker while the marginal revenue product of labor is the increase in profit as a result of hiring an additional worker. 
B)  The marginal revenue product of labor is the dollar value of hiring an additional worker while the marginal product of labor is the increase in the firm's physical output as a result of hiring an additional worker. 
C)  The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue. 
D)  Labor's marginal product is a measure of labor's productivity while labor's marginal revenue product is a measure of labor's ability to sell the firm's products.

Question 20

The wage rate is the opportunity cost of

Accepted Answer

A)  working. 
B)  working overtime. 
C)  leisure. 
D)  consumption.

Exam 17: The Markets for Labor and Other Factors of Production

What is a compensating differential?

A monopsony restricts the quantity of a factor demanded to force down the price of the factor and increase profits.

The most important factor contributing to wage differences in the labor market is differences in the level of education and training among workers.

Workers who dislike risk

The labor market in Major League Baseball features

A firm might prefer a commission system of compensation when the nature of the work is repetitive and monotonous and can be performed by an individual.

Which of the following is not held constant along a firm's demand curve for labor?

The marginal revenue product of labor is defined as

Figure 17-3 -Refer to Figure 17-3. Which of the panels in the diagram best represents an individual's labor supply curve?

Major League Baseball teams are similar to other firms in that they use factors of production to produce a product (baseball games) . An example of capital used by teams to produce their products is

All of the following will shift the labor supply curve except

Some superstar athletes in the sports industry earn very high levels of income relative to other occupations, and over time the wage differential has been increasing. What could have caused this?

In a study conducted by Marianne Bertrand and Sendhil Mullianthan, identical resumes were sent in response to help wanted ads in newspapers, with half of the resumes assigned an African-American-sounding name and half assigned a white-sounding name. The study found that

The marginal productivity theory of income distribution implies that in a perfectly competitive market economy, a worker will receive income

Suppose a competitive firm is paying a wage of $12 an hour and sells its product at $3 per unit. Assume that labor is the only input. If hiring another worker would increase output by three units per hour, then to maximize profits the firm should

Comparable worth legislation

Economic rent refers to the price of a factor of production which is fixed in supply.

What is the difference between labor's marginal product and marginal revenue product?

The wage rate is the opportunity cost of