Question 1

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 2

Which of the following is an example of a compensating wage differential?

Accepted Answer

A) Nurse anesthetists are paid less than anesthesiologists (who have medical degrees). 
B) Workers in a dynamite mine receive higher wages than if they worked in other jobs that require the same level of skills. 
C) In the market for lawyers, top graduates from the top programs earn starting salaries that are significantly higher than the starting salaries earned by lower-ranked graduates from the lower-ranked programs. 
D) Popular movie stars like George Clooney command much higher salaries than other talented but lesser-known actors.

Question 3

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 4

What are the three most important variables that cause the market supply curve of labor to shift?

Accepted Answer

The answer of What are the three most important variables...

Question 5

For most low-wage earners

Accepted Answer

A) the income effect of a wage rate increase is likely to be larger than the substitution effect. 
B) the substitution effect of a wage rate increase is likely to equal the income effect. 
C) the opportunity cost of leisure is high. 
D) the substitution effect of a wage rate increase is likely to be larger than the income effect.

Question 6

The price of a factor of production that is in fixed supply is called

Accepted Answer

A) economic rent. 
B) economic profit. 
C) a compensating differential. 
D) opportunity cost.

Question 7

In general, the supply curve for a natural resource

Accepted Answer

A) is vertical. 
B) is horizontal. 
C) slopes downward to reflect decreasing available quantities over time. 
D) slopes upward.

Question 8

Painters who paint water towers earn higher wages relative to painters who paint houses because

Accepted Answer

A) the demand for tower painters is greater than the demand for residential painters. 
B) painting water towers is more risky than painting houses. 
C) the tower painters' union is probably more powerful than the house painters' union. 
D) the supply of water tower painters exceeds the supply of house painters.

Question 9

Figure 17-1
  
Figure 17-1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies.
-Refer to Figure 17-1.If Dale can sell her doilies at $2 each, what is the marginal product of the 5th worker?

Accepted Answer

A) $28 
B) 28 doilies 
C) 14 doilies 
D) $56

Question 10

The labor supply curve

Accepted Answer

A) shows the relationship between the wage rate and the quantity of labor supplied. 
B) shows the quantity of jobs supplied at various wage rates. 
C) is unit elastic. 
D) is U-shaped.

Question 11

Marginal revenue product falls as more labor is hired because

Accepted Answer

A) the price of the product must fall for a perfectly competitive firm to sell more. 
B) the wage rate rises as more workers work more hours. 
C) the marginal product of labor is negative as additional units of labor are hired. 
D) the marginal product of labor falls as a result of the law of diminishing returns.

Question 12

Figure 17-3
 
-Refer to Figure 17-3.In Panel A, at low wages (segment i)

Accepted Answer

A) the substitution effect outweighs the income effect. 
B) the income effect outweighs the substitution effect. 
C) the substitution effect offsets the income effect. 
D) labor suppliers demand more leisure as wages increase.

Question 13

Which of the following is a reason why some firms do not use commission pay?

Accepted Answer

A) It gives workers incentive to produce more. 
B) It increases firm profits. 
C) It is difficult to measure the output and attribute output to a particular worker. 
D) The best workers stay and less productive workers leave.

Question 14

If the labor demand curve shifts to the right and the labor supply curve remains unchanged, what will happen to the equilibrium wage and the equilibrium level of employment? Illustrate your answer with a graph.

Accepted Answer

The answer of If the labor demand curve shifts to...

Question 15

For a firm that is a price taker in the market for labor, the marginal revenue product of labor equals the

Accepted Answer

A) marginal product of labor multiplied by the wage rate. 
B) marginal product of labor multiplied by the product price. 
C) marginal product of labor divided by the wage rate. 
D) marginal product of labor multiplied by the marginal cost of production.

Question 16

One implication of compensating differentials is that laws passed to protect the health and safety of workers may not make workers better off than they were prior to the passages of the laws.Why is this so?

Accepted Answer

A) Workers may suffer from cognitive dissonance, which means that the perception workers have that their jobs are hazardous is not true. 
B) If the laws make the work environment safer, there is no reason to pay workers a compensating differential for the risk associated with their jobs. 
C) The principal-agent problem that exists in the workplace may cause workers to shirk more after the work environment becomes safer. 
D) In non-competitive markets, workers are unlikely to receive a compensating differential to compensate for jobs with extra risk. As a result, after the laws are passed their wages will not change.

Question 17

If the income effect of a wage increase equals the substitution effect, the labor supply curve is horizontal at the equilibrium wage.

Accepted Answer

A) True 
 B)False

Question 18

Figure 17-4
 
-Refer to Figure 17-4.Which of the following is true if the wage rate increases from W₁ to W₂?

Accepted Answer

A) The income effect becomes larger than the substitution effect. 
B) The substitution effect becomes larger than the income effect. 
C) The income effect and the substitution effect are equal. 
D) The supply curve is unit elastic.

Question 19

If a worker can produce 20 units of output which can be sold for $4 per unit, what is the maximum wage that firm should pay to hire this worker?

Accepted Answer

A) $80 
B) $80 minus the firm's profit markup 
C) It depends on what the going wage rate is in the labor market. 
D) There is insufficient information to answer the question.

Question 20

The total amount of copper in the earth is not increasing.Does this mean that in the market for copper, the supply curve is perfectly inelastic? Explain.

Accepted Answer

The answer of The total amount of copper in the...

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