Question 1

What will the elasticity of resource demand be if unit wages rise by 5 percent and the number of employed workers falls by 12 percent?

Accepted Answer

A)   0.42
B)   1.60
C)   2.40
D)   6.00Elasticity of resource demand is the absolute value of the percentage change in quantity of workers divided by the percentage change in resource price.In this case,elasticity is |-0.12/0.05| = 2.40.E) B) and D)
F) B) and C)

Question 2

Which is an example of a change in productivity that decreases labor demand?

Accepted Answer

A)   A financial crisis in Asian nations reduces the demand for exports to Asia,thus decreasing the demand for domestic workers in the computer industry.
B)   Tattoos fade in popularity,thus decreasing the demand for tattoo artists.
C)   More government regulation decreases output per worker in the fast food industry,thus decreasing demand for fast food workers.
D)   An increase in the price of construction equipment reduces the demand for construction equipment operators.E) None of the above
F) A) and B)

Question 3

In a purely competitive industry,which of the following could cause a firm's marginal revenue product for an economic resource to increase?

Accepted Answer

A)   An increase in demand for the firm's product
B)   A reduction in the price of the resource
C)   An increase in the elasticity of the firm's supply curve
D)   A decrease in the price of the product produced by the resourceE) A) and B)
F) A) and C)

Question 4

Which action taken by a worker would not be an investment in human capital?

Accepted Answer

A)   Enrolling in college
B)   Enrolling in trade school
C)   Purchasing exercise equipment
D)   Purchasing stock in a pharmaceutical companyE) C) and D)
F) B) and C)

Question 5

If the supply of labor in a purely competitive labor market increases,the labor:

Accepted Answer

A)   supply curve for a single employer will shift downward.
B)   supply curve for a single employer will shift upward.
C)   demand curve for a single employer will shift upward.
D)   demand curve for a single employer will shift downward.E) All of the above
F) C) and D)

Question 6

Other things being equal,if a formerly competitive firm attains a high degree of monopoly power,its resource demand curve will:

Accepted Answer

A)   become perfectly inelastic.
B)   remain perfectly elastic.
C)   become more elastic.
D)   become more inelastic.E) C) and D)
F) B) and C)

Question 7

In firm X,labor costs are 85 percent of production costs,while in firm Y labor costs are 40 percent of production costs.A 20 percent increase in wages would increase production costs by:

Accepted Answer

A)   23 percent in firm X and 20 percent in firm Y.
B)   19 percent in firm X and 15 percent in firm Y.
C)   15 percent in firm X and 6 percent in firm Y.
D)   17 percent in firm X and 8 percent in firm Y.In firm X,production costs would increase by 0.85 * 0.2= 0.17 (i.e. ,17 percent) ,whereas in firm Y production costs would increase by 0.4 * 0.2 = 0.08 (i.e. ,8 percent) .E) A) and B)
F) A) and C)

Question 8

The strength of labor demand and the rightward position of the labor demand curve differ greatly among occupations due to differences in how much various occupational groups contribute to their firm's revenue.

Accepted Answer

A) True 
 B)False

Question 9

An increase in the price of aluminum increases the cost of producing aluminum products and reduces the demand for aluminum workers.This decrease in labor demand would be caused by which change in a determinant of labor demand?

Accepted Answer

A)   A fall in labor productivity
B)   An increase in product demand
C)   A decrease in product demand
D)   An increase in the price of another resourceE) B) and C)
F) B) and D)

Question 10

If the price of a good increases,then in the market for labor that is used to make this product:

Accepted Answer

A)   employment will decrease.
B)   the labor supply will increase.
C)   the marginal product (MP) of labor will increase.
D)   the marginal revenue product (MRP) of labor will increase.E) A) and B)
F) A) and C)

Question 11

A union composed of all workers in a given plant or industry is called a(n) :

Accepted Answer

A)   closed shop.
B)   craft union.
C)   monopsony union.
D)   industrial union.E) A) and B)
F) C) and D)

Question 12

A characteristic of a purely competitive labor market would be:

Accepted Answer

A)   "price-maker" behavior by the firms.
B)   "wage-taker" behavior by workers.
C)   a few firms competing for labor services.
D)   significant differences among workers in the level of work skills.E) B) and D)
F) B) and C)

Question 13

Derived demand is the demand:

Accepted Answer

A)   that arises because of monopoly control of resources in a market.
B)   for a product based on the tastes and preferences of consumers.
C)   derived from consumer satisfaction with a product.
D)   for a resource to produce a product.E) B) and C)
F) A) and B)

Question 14

The best example of an industrial union is the:

Accepted Answer

A)   United Association of Plumbers and Pipefitters.
B)   International Brotherhood of Electrical Workers.
C)   American Medical Association.
D)   United Auto Workers.E) A) and C)
F) A) and D)

Question 15

An example of derived demand is the demand for:

Accepted Answer

A)   housing by consumers.
B)   machines by businesses.
C)   paper products by households.
D)   agricultural products by foreign consumers.E) All of the above
F) C) and D)

Question 16

Marginal revenue product describes the:

Accepted Answer

A)   output produced by the last unit of input employed.
B)   revenue received for the last unit of output produced.
C)   price a consumer paid for the last unit of output produced.
D)   revenue received for the output produced by the last unit of labor employed.E) None of the above
F) B) and C)

Question 17

A characteristic of a purely competitive labor market would be:

Accepted Answer

A)   many firms competing in hiring workers.
B)   firms hiring different types of labor.
C)   wage-maker behavior by the firms.
D)   price-maker behavior by the firms.E) C) and D)
F) B) and C)

Question 18

1 to D2? A)  An increase in the price of a substitute input (if the output effect is greater than the substitution effect)  B)  An increase in the price of a substitute input (if the substitution effect is greater than the output effect)  C)  A decrease in the price of a substitute input (if the substitution effect is greater than the output effect)  D)  An increase in the price of a complementary resource" class="answers-bank-image d-inline" rel="preload" > Refer to the above graph.What will shift D1 to D2?

Accepted Answer

A)   An increase in the price of a substitute input (if the output effect is greater than the substitution effect) 
B)   An increase in the price of a substitute input (if the substitution effect is greater than the output effect) 
C)   A decrease in the price of a substitute input (if the substitution effect is greater than the output effect) 
D)   An increase in the price of a complementary resourceE) A) and C)
F) None of the above

Question 19

A firm would be likely to lay off workers following:

Accepted Answer

A)   an increase in the demand for labor.
B)   an increase in the marginal revenue product of labor.
C)   the imposition of a new minimum wage below the current equilibrium wage.
D)   a successful attempt by an industrial union to push wages above the marginal revenue product of labor.E) All of the above
F) A) and D)

Question 20

y. B)  Wx. C)  Wz. D)  Cannot be determined." class="answers-bank-image d-inline" rel="preload" > Refer to the above graph.If a monopsonist bargains with an inclusive union,as shown,the wage rate will be:

Accepted Answer

A)   Wy.
B)   Wx.
C)   Wz.
D)   Cannot be determined.E) B) and C)
F) A) and B)

Exam 10: Wage Determination

The best example of an industrial union is the:

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A characteristic of a purely competitive labor market would be:

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An increase in the price of aluminum increases the cost of producing aluminum products and reduces the demand for aluminum workers.This decrease in labor demand would be caused by which change in a determinant of labor demand?

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Which is an example of a change in productivity that decreases labor demand?

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If the price of a good increases,then in the market for labor that is used to make this product:

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Refer to the above graph.What will shift D1 to D2?

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Other things being equal,if a formerly competitive firm attains a high degree of monopoly power,its resource demand curve will:

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A firm would be likely to lay off workers following:

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The strength of labor demand and the rightward position of the labor demand curve differ greatly among occupations due to differences in how much various occupational groups contribute to their firm's revenue.

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In a purely competitive industry,which of the following could cause a firm's marginal revenue product for an economic resource to increase?

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Marginal revenue product describes the:

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Refer to the above graph.If a monopsonist bargains with an inclusive union,as shown,the wage rate will be:

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Derived demand is the demand:

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What will the elasticity of resource demand be if unit wages rise by 5 percent and the number of employed workers falls by 12 percent?

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An example of derived demand is the demand for:

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A characteristic of a purely competitive labor market would be:

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If the supply of labor in a purely competitive labor market increases,the labor:

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Which action taken by a worker would not be an investment in human capital?

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In firm X,labor costs are 85 percent of production costs,while in firm Y labor costs are 40 percent of production costs.A 20 percent increase in wages would increase production costs by:

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A union composed of all workers in a given plant or industry is called a(n) :

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Refer to the above graph.What will shift D₁ to D₂?

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