Exam
Age-earnings data show that
a. Differences in earnings by education level disappear for workers age 55 and over
b. Mens earnings increase with educational level but not womens earnings
c. Earnings rise with factors such as family background and personal drive, but not education level
d. Higher educational levels are consistently associated with higher earnings
Question 2
At the profit maximizing level of employment for a monopsonist
a. The wage exceeds the marginal wage cost
b. Marginal revenue product equals the wage
c. The wage is less than marginal wage cost
d. Marginal product equals marginal revenue product
Question 3
Following table that shows the short-run production relationship and the product demand schedule for a firm.
Labor output output price
1 10 20
2 15 19
3 19 18
4 22 17
5 24 16
6 25 15
What is the marginal revenue product of the third worker
a. 18
b. 57
c. 72
d. 342
Question 4
For a firm hiring labor and selling its output in perfectly competitive markets
a. PL MWC and VMP MRP
b. PL MWC and VMP MRP
c. PL MWC and VMP MRP
d. PL MWC and VMP MRP
Question 5
Assume that the labor market is perfectly competitive.
Labor output price
0 0 2.20
1 15 2.00
2 29 1.80
3 42 1.60
4 54 1.40
5 65 1.20
Rather than the product demand schedule shown in the table, suppose this firm sold its output competitively for a price of 2.00. In this case, how many workers will this profit-maximizing firm choose to employ at a wage of 13.20
a. 2
b. 3.
c. 4
d. 5
Question 6
Which of the following best exemplifies the Becker income effect An increase in the market wage leads a household to
a. Substitute time for goods in the production of commodities
b. Consume fewer time-intensive commodities and more goods-intensive commodities
c. Consume more commodities
d. Have fewer children
Question 7 short answer
One way of aiding low income families is to increase the minimum wage. An alternative is to provide a direct grant of nonlabor income. Compare the impact of these two options on work incentive. (hint you have use the substitution and income effects)
The increase will lead to a substitution effect this is because an increase in the incentives will enable the family have enough time to work and reduces the leisure time.
Question 8
A monopsonists marginal wage cost curve is positively sloped because
a. It discriminates by paying each worker a different wage according to his or her opportunity cost
b. It must charge a lower price for each additional unit of output, and it must charge this lower price for all units sold
c. It pays its workers lower wages, so that the supply of labor to the market is restricted
d. It must pay a higher wage to attract additional workers and it must pay this higher wage to all workers
Question 9
(World of Work 1-1) Nobel Laureate Gary Beckers basic professional contribution is his
a. Application of traditional theories of anthropology to labor markets
b. Application of the economic perspective to law, sociology, demographics, and anthropology
c. Statistical verification of race and gender discrimination
d. Explanation of the limitations of the economic perspective in explaining labor markets
Question 10
Labor economics is studied as a distinct subfield of economics because
a. The bulk of national income is received by labor
b. The concepts of supply and demand must be revised somewhat when applied to labor markets
c. Labor economics can be used to analyze major socioeconomic trends such as the surge in the number of women workers
d. All of the above
Question 11
The long-run labor demand curve incorporates
a. The substitution effect only
b. The output effect only
c. Neither the substitution effect nor the output effect
d. Both the substitution effect and the output effect
Question 12
In a perfectly competitive environment, the height of the market labor supply curve at any given number of labor hours indicates
a. The total cost of employing that number of hours in the given occupation
b. The marginal cost of employing the first hour of labor
c. The value of the alternative activity in which the marginal hour might otherwise be used
d. The maximum wage employers would be willing to pay to attract additional labor
Question 13
Allocative inefficiency in a labor market may be caused by
a. Monopoly power in the product market
b. Monoposony power in the labor market
c. Both a. and b. are correct
d. Neither a. nor b. are correct
Question 14
As distinct from product market transactions, labor market transactions are unique in that
a. To the seller, the non-monetary characteristics of the sale can be as important as the price
b. Labor demand curves slope upward
c. The price of labor is not determined by supply and demand factors
d. They are less complex
Question 15
Which of the following is a true statement
a. Monopolists employ too many labor resources, because the value of the marginal product exceeds the marginal opportunity cost of labor
b. For a monopolist, the marginal revenue product of labor exceeds marginal wage at the profit maximizing level of employment
c. Monopolists pay a lower wage than competitors for the same type of labor
d.The monopolists demand for labor curve is less elastic than if it were a competitor in the sale of its output
Question 16
Compared to an otherwise identical competitive firm, a firm with monopoly power will hire
a. Fewer workers, reflecting its decision to produce less output
b. More workers because the higher price charged by the monopoly raises its MRP
c. Fewer workers because workers are less productive in a monopoly setting
d. More workers because monopolies have higher profits and can pay higher wages
Question 17
Assume that skilled labor and energy are substitutes in production. An increase in energy prices is then predicted to
a. Unambiguously increase the demand for skilled labor
b. Unambiguously decrease the demand for skilled labor
c. increase the demand for skilled labor if the output effect outweighs the substitution effect
d. Decrease the demand for skilled labor if the output effect outweighs the substitution effect
Question 18
Because resources are scarce relative to human wants, economics is best described as
a. The science of allocating productive resources fairly
b. A science of choice
c. The science of allocating goods and services fairly
d. The set of natural laws that govern human behavior in the face of adverse conditions
Question 19
Human capital investment consists of
a. Any activity that enhances the quality of labor
b. Expenditures for formal schooling only
c. Expenditures for on-the-job training only
d. Any activity that leads to the substitution of physical capital for labor
Question 20
There will be a shortage of labor in a particular market if
a. Labor supply increases and demand decreases
b. The current wage is above the wage that would clear the market
c. There is a decrease in the price of a substitute resource
d. The current wage is below the wage that would clear the market
Question 21
Following diagram of a perfectly competitive labor market
For the supply and demand curves in the diagram, the level of employment will be highest at
a. Wage rate W1
b. Wage rate W2
c. A wage rate higher than W1
d. A wage rate lower than W2
Question 22
Which one of the following circumstances would most likely lead to increased investment in education by women
a. An increase in the likelihood of interrupted labor market careers
b. Improved employment opportunities for women
c. Higher discount rates for women than men
d. Persistent discrimination against women
Question 23
Which of the following would unambiguously predict a decrease in desired hours of work
a. The substitution effect of a wage decrease
b. The income effect of a wage decrease
c. A wage increase
d. The substitution effect of a decline in income tax rates
Question 24
If this persons wage rate falls as illustrated in the diagram, then
a. The substitution effect is stronger than the income effect
b. The income effect is stronger than the substitution effect
c. This persons non-wage income will fall as well
d. The substitution effect causes desired work hours to increase
Question 25
Assume that the labor market is perfectly competitive.
Compared to a firm facing D1, a firm facing demand schedule D2 but paying the same wage will hire
a. The same number of workers, since total product is the same in both instances
b. Fewer workers, since product price declines as output increases
c. More workers, since product price declines as output increases
d. More information is required
Question 26
The slope of a standard budget constraint reflects
a. A diminishing marginal rate of substitution of leisure for income
b. An increasing marginal rate of substitution of leisure for income
c. A constant marginal rate of substitution of leisure for income
d. The wage rate
Question 27
The bulk of national income flows to
a. Land owners in the form of rent
b. Capital owners in the form of interest
c. Capital owners in the form of profit
d. Workers in the form of wages and salaries
Question 28
Since the end of World War II, the average weekly hours of work in manufacturing has
a. Been steady, in part due to increased education
b. Been steady, in part due to lower tax rates
c. Fallen steadily
d. Increased steadily
Question 29
Compared to basic work-leisure choice model, Beckers model of time allocation
a. Considers the week rather than the day as the basic unit of time
b. Considers the household rather than the individual as the basic decision-making unit
c. Assumes that goods and services take no time to consume
d. Considers time spent in household work as work time rather than leisure time
Question 30
All else equal, the imperfectly competitive sellers labor demand curve is
a. Greater than that of a perfectly competitive seller
b. More elastic than that of a perfectly competitive seller
c. Less elastic than that of a perfectly competitive seller
d. The same as than that of a perfectly competitive seller
Question 31
A competitive firm will never choose to operate in stage(s)
a. I or II
b. I or III
c. II or III
d. III only
Question 32
Which of the following can be predicted to increase the demand for labor
a. An increase in the price of a gross substitute for labor
b. A decrease in the price of a pure complement to labor
c. A decrease in product demand
d. all of the above
Question 33
Which one of the following will tend to increase the likelihood of participation in the labor force for a current non-participant
a. A decrease in the spouses wage
b. An increase in the spouses wage
c. An increase in family size
d. Falling productivity in household production of commodities
Question 34
Suppose that, as a result of an increase in the market supply of labor, the wage rate has fallen 10. After adjusting its employment levels, a firm finds its total wage bill has decreased. This occurrence indicates that the firms labor demand
a. Is inelastic over this range of wages
b. Is elastic over this range of wages
c. Is unit elastic over this range of wages
d. Was inelastic at the old wage, but is elastic at the new, lower wage
Question 35
An increase in the wage rate will increase desired hours of work if
a. The income effect and substitution effect cancel one another
b. The income effect dominates the substitution effect
c. The substitution effect dominates the income effect
d. Accompanied by an increase in non-wage income
Question 36
INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET Suppose workers in labor market X are qualified to work in an alternative competitive labor market Y, and vice versa. An increase in the demand for labor in market Y will
Answer INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET
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Increase labor supply in X and drive its wage down
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Decrease labor supply in X and drive its wage up
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Reduce labor supply in Y and drive its wage down
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Have no impact at all in X
Question 37
INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET Suppose a working mother is currently ineligible for any government assistance. If she were then to become eligible for an income maintenance program that incorporates both a basic benefit and a positive benefit-reduction rate
Answer INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET
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Both the income and substitution effect will cause her to increase her work effort
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Both the income and substitution effect will cause her to decrease her work effort
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Her work effort will increase if the substitution effect is stronger than the income effect
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Her work effort will decrease if the substitution effect is stronger than the income effect
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Questions 49 and 50 are based on the following information Assume under an income maintenance program that the basic benefit (income guarantee) is 9000 and the benefit-reduction rate is 50
Question 38 short answer
INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET Floyd is now working in a job that pays 8000 per year. he is contemplating a one year automobile mechanics course that cost 1000 for book and tuition. Floyd estimates that the course will increase his income to 13000 in each year of the 3 years following completion of the course. At the end of those 3 years. If current interest rate is 10 is it economically rational for Floyd to enroll in the course
Yes. There will be n increase in his income. The NPV of the amount to be earned is, 5000 (1.11) 5000 (1.12) 1000 5000 4545 4132 1000 7677. Hence it is economical since there will be an increase in the income by 7677.
Question 39
INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET The three basic characteristics of the economic perspective are
Answer INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET
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Relative scarcity, purposeful behavior, and adaptability
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Supply, demand, and equilibrium
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Description, institutions, and facts
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Prices, quantities, and incomes
Question 40
INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET (World of Work 3-7) Research by Hamermesh and Less suggests that
Answer INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET
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High income earners would be happier if they earned less
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Less than 10 of U.S. married couples report feeling stressed for time
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Although Germans work fewer hours than the Japanese, they report more time stress
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All else constant, higher earnings lead to greater time stress
Question 41
INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET Which of the following best describes the substitution effect of a wage increase
Answer INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET
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The firms marginal cost increases, the firm desires to produce less output, and therefore less labor is required
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The cost of labor is relatively higher causing the firm to use relatively less labor
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The firms labor demand curve becomes less elastic, causing it to employ less labor
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The firms labor demand curve becomes more elastic, causing it to employ less labor
Question 42
INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET In the context of the basic work-leisure model, work is defined as
Answer INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET
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Time devoted to a paying job or household work
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Time devoted to a paying job
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Time devoted to any undesirable activity
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All time not devoted to rest and relaxation
Question 43
INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET The old view of labor economics stresses _____ while the new view focuses upon _____.
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Analysis markets
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Description analysis
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Description institutions
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Institutions description
Question 44
INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET At the profit maximizing level of employment for a monopolist
Answer INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET
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Marginal revenue product equals the value of marginal product
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Marginal revenue product exceeds the value of marginal product
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Value of marginal product equals the marginal wage cost
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Marginal revenue product is less than the value of marginal product
Question 45
INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET Which of the following best describes the output effect of a wage increase
Answer INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET
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The firms marginal cost increases, the firm desires to produce less output, and therefore less labor is required
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The cost of labor is relatively higher causing the firm to use relatively less labor
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The firms marginal cost falls, the firm desires to produce more output, and therefore more labor is required
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The firms labor demand curve becomes more inelastic, causing it to employ less labor
Question 46
INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET In Beckers model of time allocation, the difference between goods and commodities is that commodities are produced
Answer INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET
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In markets whereas goods are produced in households
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Only with housework
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By combining goods with time
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In the market, whereas goods are produced in the home
Question 47
INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET Which of the following actions might a union use to try to restrict the growth of labor supply
Answer INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET
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Increase product demand
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Reduce the number of qualified workers
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Enhance worker productivity
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Reduce the wage for nonunion labor
Question 48
INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET INCLUDEPICTURE httpbb.wpunj.educourses1201010-ECON340-60ppg1225760385437061image001.png MERGEFORMATINET According to human capital theory, areas 1, 2, and 3 represent respectively
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Indirect costs, direct costs, and incremental earnings
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Direct costs, indirect costs, and incremental earnings
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Indirect costs, direct costs, and total earnings
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Direct costs, indirect costs, and total earnings
Question 49
INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET At the optimal amount of education, the internal rate of return on education is
Answer INCLUDEPICTURE httpbb.wpunj.eduimagesspacer.gif MERGEFORMATINET
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Maximized
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Higher than the market rate of interest
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Lower than the market rate of interest
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Equal to the market rate of interest
Question 50
The long-run response to a drop in the wage exceeds the short-run response for all of the following reasons except
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It is more difficult to substitute capital for labor in the long run than the short run
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An increase in labor makes capital more productive, leading to more capital and therefore higher labor productivity
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The demand for the firms output is more elastic in the long run
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Technology may change in the long run.