1. Suppose product demand is given by the column labeled D1. If the wage rate rises from $100 to $130, the firm will reduce the quantity of labor employed by _____ unit(s)
Select one:
a. 0
b. 1
c. 2
d. 3
2. Suppose product demand is given by the column labeled D2. If the wage rate is $100, the firm will achieve maximum profit by hiring _____ workers
Select one:
a. 2
b. 3
c. 4
d. 5
3. Compared to a firm facing D1, a firm facing demand schedule D2 but paying the same wage will hire:
Select one:
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
4. Compared to an otherwise identical competitive firm, a firm with monopoly power will hire:
Select one:
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
5. Which of the following best describes the substitution effect of a wage decrease?
Select one:
a. The firm's marginal cost decreases, the firm desires to produce less output, and therefore less labor is required
b. The cost of labor is relatively lower causing the firm to use relatively more labor
c. The firm's labor demand curve is less elastic, causing it to employ less labor
d. The firm's labor demand curve becomes more inelastic, causing it to employ less labor
6. "To find the market demand curve for a particular type of labor, simply sum the labor demand curves of all employers of that type of labor." This statement is:
Select one:
a. True
b. false - sum the value of marginal product curves for the firms to account for changes in wage rates as employment increases
c. false - sum the value of marginal product curves for the firms to account for changes in output price as production increases
d. false - although the price of output for any individual firm may be constant, this may not be the case for all firms taken collectively
7. 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 firm’s labor demand:
Select one:
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
8. A perfectly competitive labor market may be characterized by all of the following except:
Select one:
a. neither firms nor workers have any control over the market wage
b. a few firms that dominate hiring in the market
c. numerous equally qualified workers
d. perfect information
9. Which of the following best explains why the market labor supply curve is upward sloping, even though individual supply curves are normally backward bending?
Select one:
a. The statement is not true: market labor supply curves are also backward bending
b. Market labor supply curves are “price-adjusted,†whereas individual supply curves are not
c. Lower wages in a given market increase the demand for labor, so more labor must be supplied to maintain labor market equilibrium
d. Higher wages in a given market attract more workers away from other activities, more than compensating for any reduction in hours by individuals already in the market
10 . At wage rate W1there is an:
Select one:
a. excess supply of labor and the wage rate will fall
b. excess supply of labor and the wage rate will rise
c. excess demand for labor and the wage rate will fall
d. excess demand for labor and the wage rate will rise