Question 1

In the medical profession, pediatricians receive lower salaries than cardiologists. Suppose the government passes comparable worth legislation that requires hospitals to pay pediatricians the same salaries as cardiologists. Explain the effect of this legislation and illustrate your answer with demand and supply graphs for the following two scenarios:
a. hospitals respond by placing salaries at a level between the two existing salaries
b. hospitals respond by placing pediatricians' salaries at the initial level of cardiologists.

Accepted Answer

a. Refer to the diagram below.
Panel A P...

Question 2

The substitution effect of a wage decrease examines the effect of the decrease in wage income on a worker's ability to consume goods and services.

Accepted Answer

A) True 
 B)False

Question 3

What happens to the equilibrium wage and quantity of labor if output price rises?

Accepted Answer

A)   The equilibrium wage and the equilibrium quantity of labor rise.
B)   The equilibrium wage and the equilibrium quantity of labor fall.
C)   The equilibrium wage falls and the equilibrium quantity of labor rises.
D)   The equilibrium wage rises and the equilibrium quantity of labor falls.E) All of the above
F) B) and D)

Question 4

If an additional worker can produce an additional 20 units of output which can be sold for $4 per unit, what is the maximum wage that this perfectly competitive 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.E) C) and D)
F) None of the above

Question 5

Personnel economics is

Accepted Answer

A)   the study of the factors that determine wage rates.
B)   the study of how workers are affected by tax law changes.
C)   the application of economic analyses to human resource issues.
D)   the application of economic analysis to the hiring decision.E) All of the above
F) B) and D)

Question 6

The combined effect (both income and substitution)  of a wage increase is that

Accepted Answer

A)   the substitution effect always dominates, leading to more work at a higher wage.
B)   the income effect always dominates, leading to less work at a higher wage.
C)   if the substitution effect outweighs the income effect, the labor supply curve slopes upward, but if the income effect outweighs the substitution effect, the labor supply curve is backward bending.
D)   if the substitution effect outweighs the income effect, the labor supply curve is backward bending, but if the income effect outweighs the substitution effect, the labor supply curve slopes upward.E) All of the above
F) B) and C)

Question 7

One reason why the average salary of Major League Baseball players is higher than the average salary of college professors is

Accepted Answer

A)   the careers of most baseball players are much shorter than the careers of most college professors.
B)   the marginal revenue product of baseball players is greater than the marginal revenue product of college professors.
C)   college professors accept lower salaries in exchange for better working conditions.
D)   competition among baseball club owners forces player salaries to be much higher than the players' marginal revenue products.E) A) and C)
F) B) and C)

Question 8

What are the five most important variables that cause the market demand curve for labor to shift?

Accepted Answer

The most important factors that cause th...

Question 9

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 supply of copper is the quantity firms are willing to sell at each price. As price increases, firms are willing to work harder to mine copper, so the quantity supplied will increase as the price of copper rises, even though the total amount of copper in the ground is not increasing. Therefore, the supply curve for copper is not perfectly inelastic.

Question 10

Compared to high school graduates, what is likely to happen to employment and wages for college graduates during a recession?

Accepted Answer

In economic recessions when unemployment...

Question 11

The economists at the New York Fed estimate that the return the typical person receives from an investment in a college education is

Accepted Answer

A)   4.5 percent per year.
B)   12.5 percent per year.
C)   15 percent per year.
D)   more than 40 percent per year.E) B) and C)
F) A) and B) C

Question 12

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. Suppose the market price of doilies rises to $3. What happens to the curve given in the diagram?

Accepted Answer

A)   Nothing, because labor's productivity has not changed.
B)   There will be a movement along the curve.
C)   The curve shifts to the right.
D)   We cannot answer the question without knowing if Dale would want to hire more workers.E) None of the above
F) All of the above

Question 13

The marginal productivity theory of income distribution states that a person's total income is determined by

Accepted Answer

A)   the amount and productivity of factors of production the individual owns.
B)   how much the individual works.
C)   how profitable the firm the individual works for is.
D)   how much the individual has inherited.E) All of the above
F) A) and D)

Question 14

Suppose a competitive firm is paying a wage of $12 an hour. Assume that labor is the only input. If hiring another worker would increase output by four units per hour, then to maximize profits the firm should

Accepted Answer

A)   not change the number of workers it currently hires.
B)   hire the extra worker.
C)   layoff some workers.
D)   There is not enough information to answer the question.E) B) and C)
F) All of the above

Question 15

Figure 17-4 0 to W1? A)  The income effect is larger than the substitution effect. B)  The substitution effect is larger than the income effect. C)  The income effect and the substitution effect are equal. D)  The supply curve is unit elastic." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 17-4. Which of the following is true if the wage rate increases from W0 to W1?

Accepted Answer

A)   The income effect is larger than the substitution effect.
B)   The substitution effect is larger than the income effect.
C)   The income effect and the substitution effect are equal.
D)   The supply curve is unit elastic.E) All of the above
F) C) and D)

Question 16

If the labor supply curve shifts to the right and the labor demand 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 equilibrium wage will fall from W₁ to W₂ and the equilibrium level of employment will rise from L₁ to L₂.

Question 17

The market price of a factor of production that is in fixed supply is determined only by demand.

Accepted Answer

A) True 
 B)False

Question 18

If the market wage rate increases, a firm's labor demand curve does not shift but the labor supply curve shifts to the right.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following factors will not cause the labor demand curve to shift?

Accepted Answer

A)   increases in human capital
B)   changes in technology
C)   a change in the price of the product produced with labor
D)   the wage rateE) A) and B)
F) B) and C)

Question 20

An increase in a perfectly competitive firm's demand for labor could be caused by

Accepted Answer

A)   a decrease in the market wage rate.
B)   an increase in the amount of human capital among the labor force.
C)   an increase in the supply of labor.
D)   a decrease in the market price of the product the firm produces.E) B) and D)
F) B) and C)

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

Correct Answer
verified
a. Refer to the diagram below.
Panel A P...
View Answer

The substitution effect of a wage decrease examines the effect of the decrease in wage income on a worker's ability to consume goods and services.

Correct Answer
verified

What happens to the equilibrium wage and quantity of labor if output price rises?

Correct Answer
verified

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

Correct Answer
verified

Personnel economics is

Correct Answer
verified

The combined effect (both income and substitution) of a wage increase is that

Correct Answer
verified

One reason why the average salary of Major League Baseball players is higher than the average salary of college professors is

Correct Answer
verified

What are the five most important variables that cause the market demand curve for labor to shift?

Correct Answer
verified
The most important factors that cause th...
View Answer

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.

Compared to high school graduates, what is likely to happen to employment and wages for college graduates during a recession?

Correct Answer
verified
In economic recessions when unemployment...
View Answer

The economists at the New York Fed estimate that the return the typical person receives from an investment in a college education is

Correct Answer
verified
C

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. Suppose the market price of doilies rises to $3. What happens to the curve given in the diagram?

Correct Answer
verified

The marginal productivity theory of income distribution states that a person's total income is determined by

Correct Answer
verified

Suppose a competitive firm is paying a wage of $12 an hour. Assume that labor is the only input. If hiring another worker would increase output by four units per hour, then to maximize profits the firm should

Correct Answer
verified

Figure 17-4 -Refer to Figure 17-4. Which of the following is true if the wage rate increases from W₀ to W₁?

Correct Answer
verified

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

Correct Answer
verified
The equilibrium wage will fall from W₁ to W₂ and the equilibrium level of employment will rise from L₁ to L₂. 11eadd59_9564_7cd6_870d_c9ff0bc3fc35_TB7397_00

The market price of a factor of production that is in fixed supply is determined only by demand.

Correct Answer
verified

If the market wage rate increases, a firm's labor demand curve does not shift but the labor supply curve shifts to the right.

Correct Answer
verified

Which of the following factors will not cause the labor demand curve to shift?

Correct Answer
verified

An increase in a perfectly competitive firm's demand for labor could be caused by

Correct Answer
verified

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

Correct Answerverifieda. Refer to the diagram below.Panel A P...View AnswerShow Answer

The substitution effect of a wage decrease examines the effect of the decrease in wage income on a worker's ability to consume goods and services.

Correct AnswerverifiedShow Answer

What happens to the equilibrium wage and quantity of labor if output price rises?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Personnel economics is

Correct AnswerverifiedShow Answer

The combined effect (both income and substitution) of a wage increase is that

Correct AnswerverifiedShow Answer

One reason why the average salary of Major League Baseball players is higher than the average salary of college professors is

Correct AnswerverifiedShow Answer

What are the five most important variables that cause the market demand curve for labor to shift?

Correct AnswerverifiedThe most important factors that cause th...View AnswerShow Answer

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.

Compared to high school graduates, what is likely to happen to employment and wages for college graduates during a recession?

Correct AnswerverifiedIn economic recessions when unemployment...View AnswerShow Answer

The economists at the New York Fed estimate that the return the typical person receives from an investment in a college education is

Correct AnswerverifiedC

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. Suppose the market price of doilies rises to $3. What happens to the curve given in the diagram?

Correct AnswerverifiedShow Answer

The marginal productivity theory of income distribution states that a person's total income is determined by

Correct AnswerverifiedShow Answer

Suppose a competitive firm is paying a wage of $12 an hour. Assume that labor is the only input. If hiring another worker would increase output by four units per hour, then to maximize profits the firm should

Correct AnswerverifiedShow Answer

Figure 17-4 -Refer to Figure 17-4. Which of the following is true if the wage rate increases from W0 to W1?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedThe equilibrium wage will fall from W1 to W2 and the equilibrium level of employment will rise from L1 to L2. 11eadd59_9564_7cd6_870d_c9ff0bc3fc35_TB7397_00

The market price of a factor of production that is in fixed supply is determined only by demand.

Correct AnswerverifiedShow Answer

If the market wage rate increases, a firm's labor demand curve does not shift but the labor supply curve shifts to the right.

Correct AnswerverifiedShow Answer

Which of the following factors will not cause the labor demand curve to shift?

Correct AnswerverifiedShow Answer

An increase in a perfectly competitive firm's demand for labor could be caused by

Correct AnswerverifiedShow Answer

Correct Answer
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a. Refer to the diagram below.
Panel A P...
View Answer

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The most important factors that cause th...
View Answer

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In economic recessions when unemployment...
View Answer

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C

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Correct Answer
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Figure 17-4 -Refer to Figure 17-4. Which of the following is true if the wage rate increases from W₀ to W₁?

Correct Answer
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Correct Answer
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The equilibrium wage will fall from W₁ to W₂ and the equilibrium level of employment will rise from L₁ to L₂. 11eadd59_9564_7cd6_870d_c9ff0bc3fc35_TB7397_00

Correct Answer
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