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According to the U.S.Bureau of Labor Statistics, between 2000 and 2005, real wages in concrete work fell by 16.5%, despite a soaring demand for workers.This implies that the supply of workers in this field increased faster than the demand for workers.

A) True
B) False

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Why do professional basketball players earn more than police officers? Illustrate this situation graphically.

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Wages are based on the marginal revenue ...

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How will an increase in labor productivity affect equilibrium in the labor market?


A) The supply of labor will increase and the equilibrium wage and quantity of labor will increase.
B) The demand for jobs will increase and the equilibrium wage and quantity of labor will increase.
C) The demand for labor will increase and the equilibrium wage and quantity of labor will increase.
D) The demand for labor will decrease because fewer workers will be needed to produce the same output. The equilibrium wage and quantity of labor will decrease.

E) All of the above
F) C) and D)

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If the labor demand curve shifts to the left 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.

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The equilibrium wage will fall...

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Which of the following summarizes the impact of population growth on the labor market?


A) This will increase the labor supply, reduce the equilibrium wage and increase the quantity of labor demanded.
B) There will be an increase in the demand for labor. As a result, the wage rate will rise and the quantity of workers supplied will decrease.
C) There will be an increase in the demand for jobs. This will result in an increase in the equilibrium wage rate and a movement along the labor supply curve.
D) There will be an increase in both the demand for labor and the supply of labor. As a result, the equilibrium wage will not change.

E) A) and B)
F) None of the above

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Suppose a competitive firm pays 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 five units per hour, then to maximize profits the firm should


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

E) A) and B)
F) B) and D)

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Customer discrimination occurs when


A) a firm pays workers different wages based on irrelevant factors.
B) customers refuse to buy products produced by a racially diverse workforce.
C) customers refuse to buy products they believe to be of poor quality.
D) workers refuse to serve customers of a different race.

E) A) and C)
F) B) and D)

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

E) A) and B)
F) A) and C)

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Table 17-3 Table 17-3 Hotspur Incorporated, a manufacturer of microwave ovens, is a price taker in its input and output markets.The firm hires labor at a constant wage rate of $800 per week and sells microwave ovens at a constant price of $80.Table 17-3 shows the relationship between the quantity of labor it hires and the quantity of microwave ovens it produces. -Refer to Table 17-3.What is the amount of revenue added as a result of hiring the fourth worker? A) $1,200 B) $7,200 C) 15 microwaves D) 90 microwaves Hotspur Incorporated, a manufacturer of microwave ovens, is a price taker in its input and output markets.The firm hires labor at a constant wage rate of $800 per week and sells microwave ovens at a constant price of $80.Table 17-3 shows the relationship between the quantity of labor it hires and the quantity of microwave ovens it produces. -Refer to Table 17-3.What is the amount of revenue added as a result of hiring the fourth worker?


A) $1,200
B) $7,200
C) 15 microwaves
D) 90 microwaves

E) C) and D)
F) B) and D)

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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.

A) True
B) False

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The typical labor supply curve is upward sloping but it is possible for the curve to be backward bending - negatively sloped - at very high wage levels.Which of the following would cause a backward-bending supply curve?


A) This would occur when the income effect from an increase in the wage becomes larger than the substitution effect.
B) This would occur when the substitution effect from an increase in the wage becomes larger than the income effect.
C) This would occur if leisure is an inferior good.
D) This would occur when a large number of workers choose leisure rather than employment at low wages; only a very large increase in the wage will lead these workers to prefer employment to leisure.

E) B) and C)
F) None of the above

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

A) True
B) False

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According to two economists, George Ackerlof and William Dickens, how can cognitive dissonance affect workers' perceptions of their jobs?


A) Cognitive dissonance makes workers believe that measures to improve their health and safety in the workplace are ineffective.
B) Cognitive dissonance causes workers to perceive they are victims of discrimination when, in fact, they are not.
C) Cognitive dissonance might cause workers to underestimate the true risks of their jobs.
D) Cognitive dissonance causes a worker to believe his marginal revenue product is greater than it really is.

E) B) and C)
F) A) and D)

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Wage differences can be explained by all of the following except


A) compensating differentials.
B) differences in marginal revenue products.
C) economic discrimination.
D) comparable worth.

E) A) and B)
F) A) and C)

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Which of the following statements about commission systems of compensation is false?


A) They increase the risk to workers because sometimes output declines for reasons not connected to the worker's effort.
B) During sluggish periods, an employer's payroll expenses will decline along with sales.
C) If workers are paid on the basis of the number of units produced, they may become less concerned about quality.
D) The lack of income stability will induce the more productive workers to leave in search of more secure employment.

E) C) and D)
F) All of the above

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A reason why a perfectly competitive firm's demand for labor curve slopes downward is that


A) each additional unit of labor hired is less efficient than previously hired units.
B) in the short run, as more labor is hired, labor's marginal product falls because of the law of diminishing returns.
C) the extra cost of hiring additional units of labor increases as a firm hires more units of labor.
D) the firm's demand curve for the product that uses labor is downward sloping.

E) A) and C)
F) A) and B)

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The firm's gain in profit from hiring another worker is


A) the marginal revenue product of the extra worker.
B) the difference between marginal revenue product and the wage of the worker.
C) the extra output of the extra worker.
D) the reduction in costs from hiring another worker.

E) A) and B)
F) None of the above

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The marginal revenue product of capital is


A) the cost to the firm of renting an additional unit of capital.
B) the change in the firm's revenue as a result of employing one more unit of capital, such as a machine.
C) the economic rent received by hiring an additional unit of capital.
D) the revenue generated by substituting capital for labor in the production process.

E) None of the above
F) A) and D)

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


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

E) A) and C)
F) All of the above

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According to the marginal productivity theory of income


A) the greater the quantity of resources owned by an individual, the greater his incentive to increase productivity and his income.
B) the average income received by an individual who supplies resources is influenced by the resources owner's marginal productivity.
C) the income received by an individual who supplies labor services equals the incremental benefit generated to the firm by that individual's labor.
D) the income received by an individual who supplies labor services equals the profit generated to the firm by that individual's labor.

E) None of the above
F) C) and D)

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