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NORTH EASTERN UNIVERSITY ECON 1001 ECONOMICS 1001 Chap. 013 Wage Determination (GRADE A)

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Chapter 13  Wage Determination  WITH ANSWERS
Multiple Choice Questions
 

1. Real wages in the United States in the long run: 
A. show no discernible relationship to output per worker.
B. have increased at about the same rate as increases in output per worker.
C. have increased slower than increases in output per worker.
D. have increased faster than increases in output per worker. 

2. The long-run trend of real wages: 
A. cannot be determined from available data on nominal wages and the price level.
B. has been downward because the price level has risen faster than nominal wages.
C. has been upward.
D. has been downward because labor's share of the domestic income has fallen.

3. If the nominal wages of carpenters rose by 5 percent in 2010 and the price level increased by 3 percent, then the real wages of carpenters: 
A. decreased by 2 percent.
B. increased by 2 percent.
C. increased by 3 percent.
D. increased by 8 percent.

4. Over the long run, real earnings per worker can increase only at about the same rate as the economy's rate of growth of: 
A. total output.
B. stock of capital.
C. output per worker.
D. international trade. 

5. Increases in the productivity of labor result partly from: 
A. the law of diminishing returns.
B. improvements in technology.
C. reductions in wage rates.
D. increases in the quantity of labor.

 

6. The real wage will rise if the nominal wage: 
A. falls more rapidly than the general price level.
B. increases at the same rate as labor productivity.
C. increases more rapidly than the general price level.
D. falls at the same rate as the general price level.

7. The productivity and real wages of workers in industrially advanced economies have risen historically partly because: 
A. workers have acquired less education and training over time.
B. workers have been able to use larger quantities of capital equipment.
C. over time the capital equipment used by workers has deteriorated in quality.
D. the supply of labor has increased. 

8. If the nominal wage rises by 4 percent, and the price level rises by 7 percent, the real wage will: 
A. be unaffected.
B. rise by 3 percent.
C. fall by 3 percent.
D. rise by 11 percent. 

9. If the nominal wage rises by 6 percent, and the price level falls by 2 percent, the real wage will: 
A. be unaffected.
B. rise by 4 percent.
C. fall by 4 percent.
D. rise by 8 percent.

10. Marginal revenue product (MRP) of labor refers to the: 
A. increase in total revenue resulting from the sale of an additional unit of output.
B. amount by which a firm's total resource cost increases when it employs one more unit of labor.
C. increase in total revenue resulting from the hire of one more unit of labor.
D. price at which additional units of labor can be employed in a monopsonized labor market. 

11. Marginal resource cost refers to the: 
A. increase in total revenue resulting from the sale of the extra output of one more worker.
B. price at which additional units of a resource can be hired in an imperfectly competitive resource market.
C. increase in total cost resulting from the production of one more unit of output.
D. amount by which a firm's total resource cost increases as the result of hiring one more unit of the resource.

 

12. If a firm is hiring a certain type of labor under purely competitive conditions: 
A. its labor demand curve will be perfectly elastic at the market-determined wage rate.
B. the labor supply curve will lie above the marginal labor cost curve.
C. the labor supply and marginal labor (resource) cost curves will coincide and be upsloping.
D. the labor supply and marginal labor (resource) cost curves will coincide and be perfectly elastic.

13. The market supply curve for labor is upsloping because: 
A. of diminishing returns.
B. of the opportunity cost of labor in housekeeping, leisure, or alternative employments.
C. of declining MRC.
D. each employer is a "wage taker." 

14. A firm operating in a purely competitive resource market faces a resource supply curve that is: 
A. perfectly inelastic.
B. perfectly elastic.
C. highly inelastic.
D. highly elastic.

15. A firm that is hiring labor in a purely competitive labor market and selling its product in a purely competitive product market will maximize its profit by hiring labor until: 
A. marginal revenue product is zero.
B. marginal revenue product exceeds marginal resource (labor) cost by the greatest amount.
C. marginal resource cost is zero.
D. marginal revenue product equals marginal resource (labor) cost.

16. A profit-maximizing firm will: 
A. expand employment if marginal revenue product exceeds marginal resource cost.
B. reduce employment if marginal revenue product exceeds marginal resource cost.
C. expand employment if marginal revenue product equals marginal resource cost.
D. reduce employment if marginal revenue product equals marginal resource cost.

17. A profit-maximizing firm will: 
A. expand employment if marginal revenue product equals marginal resource cost.
B. reduce employment if marginal revenue product equals marginal resource cost.
C. reduce employment if marginal revenue product is less than marginal resource cost.
D. expand employment if marginal revenue product is less than marginal resource cost.

 

18. A firm hiring labor in a perfectly competitive labor market faces a: 
A. downsloping labor supply curve and upsloping labor demand curve.
B. upsloping labor supply curve and downsloping labor demand curve.
C. upsloping labor supply curve and horizontal labor demand curve.
D. horizontal labor supply curve and downsloping labor demand curve.

 

   

 

19. Refer to the above data. If there is neither a union nor a minimum wage, we can conclude that this firm: 
A. "purchases" labor in purely competitive labor market.
B. is a monopsonist.
C. faces a perfectly inelastic labor supply curve.
D. has a perfectly elastic labor demand curve.

 

20. Refer to the above data. In maximizing its profit, this firm will employ: 
A. 2 units of labor.
B. 3 units of labor.
C. 4 units of labor.
D. 5 units of labor.

 

21. Refer to the above data. At the profit maximizing level of employment, this firm's total labor cost will be: 
A. $16.
B. $30.
C. $24.
D. $32.

 

22. Refer to the above data. At the profit maximizing level of employment, this firm's total revenue will be: 
A. $16.
B. $32.
C. $24.
D. $30.

 

   

 23. Refer to the above diagrams. The firm: 
A. is a monopsonist in the hiring of labor.
B. must be selling its product in an imperfectly competitive market.
C. is a "wage taker."
D. must pay a higher marginal resource cost for each successive worker.

 

24. Refer to the above diagrams. The firm: 
A. has a principal-agent problem.
B. has a constant marginal resource cost of $5.
C. has a marginal resource cost that exceeds the wage rate for each worker.
D. will fail to maximize profits if it hires 5 workers.

 

25. Refer to the above diagrams. The profit-maximizing firm's total wage cost: 
A. is 0abc.
B. is 0Wbc.
C. is Wab.
D. cannot be determined.

 

26. Refer to the above diagrams. The profit-maximizing firm's total revenue: 
A. is 0abc.
B. is 0Wbc.
C. is Wab.
D. cannot be determined.

 

27. Refer to the above diagrams. At the profit-maximizing level of employment for this firm, the amount available to pay to nonlabor resources: 
A. is 0abc.
B. is 0Wbc.
C. is Wab.
D. cannot be determined.

 

28. The individual firm in a purely competitive labor market faces: 
A. a perfectly elastic labor supply curve and a downsloping labor demand curve.
B. a perfectly elastic labor demand curve and an upsloping labor supply curve.
C. labor demand and labor supply curves both of which are perfectly elastic.
D. a downsloping labor demand curve and an upsloping labor supply curve.

 

   

29. Refer to the above data. This firm's product price is: 
A. $2.
B. $3.
C. $4.
D. $16.

 

30. Refer to the above data. The marginal revenue product of the second worker is: 
A. $16.
B. $32.
C. $8.
D. $4.

 

31. Refer to the above data. The marginal revenue product of the fourth worker is: 
A. $8.
B. $52.
C. $2.
D. $4.

 

32. Refer to the above data. We can conclude from the information given that this firm is a: 
A. pure monopolist.
B. discriminating monopolist.
C. monopolistic competitor.
D. pure competitor.

 

33. Refer to the above data. If the market wage rate is $8, this firm will employ: 
A. 2 workers.
B. 3 workers.
C. 4 workers.
D. 5 workers.

 

34. Refer to the above data. If the market wage rate is $8 and the firm hires its profit-maximizing number of workers, the firm's total wage bill (payment) will be: 
A. $16.
B. $24.
C. $32.
D. $48.

 

35. Refer to the above data. If the market wage rate is $8 and the firm hires its profit-maximizing number of workers, the firm's total revenue will exceed its total wage payment by: 
A. $20.
B. $16.
C. $12.
D. $8.

 

36. Refer to the above data. If this firm can hire as few or many workers as it wants at $8, it is: 
A. hiring labor in a monopsony labor market.
B. hiring labor in a purely competitive labor market.
C. selling its product in a monopolized product market.
D. selling its product in a purely competitive product market.

 

   

 

37. Refer to the above list. The outcome in a purely competitive labor market is shown by: 
A. 1.
B. 2.
C. 3.
D. 4.

 

38. Refer to the above list. The outcome in a monopsony labor market is shown by: 
A. 1.
B. 2.
C. 3.
D. 4.

 

39. The labor supply curve facing a purely competitive employer is __________ whereas the labor supply curve facing a monopsonist is _________. 
A. upsloping; horizontal
B. downsloping; vertical
C. vertical; upsloping
D. horizontal; upsloping

 

40. The economic term for a firm that is the sole buyer in a market is: 
A. monopsonist.
B. monopolist.
C. bilateral competitor.
D. bilateral monopolist.

 

41. In a monopsonistic labor market the employer will maximize profits by employing workers up to that point at which: 
A. the difference between the wage rate and marginal resource (labor) cost is at a maximum.
B. marginal revenue product equals marginal resource (labor) cost.
C. the wage rate equals marginal revenue product.
D. the wage rate equals marginal resource (labor) cost.

 

 

42. A firm can hire six workers at a wage rate of $8 per hour but must pay $9 per hour to all of its employees to attract a seventh worker. The marginal wage cost of the seventh worker is: 
A. $9.
B. $10.
C. $15.
D. $21.

 

43. Suppose the MRP of a firm's twelfth worker is $22 and the worker's marginal wage cost is $16. We can say with certainty that the firm: 
A. is hiring labor in a competitive labor market at a wage rate of $16.
B. is hiring labor in a monopsonistic labor market.
C. will find it profitable to hire fewer workers.
D. will find it profitable to hire more workers.

 

44. In monopsony: 
A. each firm employs a small portion of the total supply of labor.
B. the work force is highly mobile.
C. the wage rate paid by the employer varies directly with the number of workers employed.
D. the employer is a "wage taker."

 

45. Which of the following is most likely to be an example of monopsony? 
A. The market for fast-food workers in a large summer resort town.
B. The market for card dealers in Las Vegas.
C. The market for major league baseball umpires.
D. The market for retail sales clerks in a major city.

 

46. If a firm faces an upsloping labor supply curve (and there is no union or minimum wage), its: 
A. MRC curve is also upsloping.
B. MRC curve is perfectly elastic.
C. MRP curve is perfectly inelastic.
D. MRP curve is also upsloping.

 

47. A monopsonist's wage cost in hiring an additional worker is the: 
A. worker's wage rate.
B. worker's wage rate plus the wage increases paid to all workers already employed.
C. worker's wage rate adjusted for the lower price that must be charged for the extra output.
D. marginal wage cost less the wage rate.

 

48. A monopsonistic employer: 
A. has a perfectly elastic labor supply curve.
B. is necessarily a monopolist in the product market.
C. confronts a marginal resource (labor) cost that is greater than the wage rate.
D. confronts a marginal resource (labor) cost that is less than the wage rate.

 

49. Other things equal, the monopsonistic employer will pay a: 
A. lower wage rate and hire fewer workers than will a purely competitive employer.
B. higher wage rate but hire fewer workers than will a purely competitive employer.
C. lower wage rate but hire a larger number of workers than will a purely competitive employer.
D. higher wage rate and hire a larger number of workers than will a purely competitive employer.

 

50. A monopsonistic employer in an unorganized (nonunion) labor market will: 
A. pay a wage rate less than labor's MRP.
B. pay the same wage rate but hire fewer workers than if the market was purely competitive.
C. hire the number of workers indicated by the intersection of the MRC and the labor supply curves.
D. pay a wage rate in excess of labor's MRP.

 

51. As compared to a purely competitive labor market, in a nonunionized monopsonistic labor market wages: 
A. and employment will both be lower.
B. will be higher, but employment will be lower.
C. will be lower, but employment will be higher.
D. and employment will both be higher.

 

52. "Player drafts" of professional athletes: 
A. increase the competitiveness of the labor market for professional athletes.
B. reduce the profitability of professional sports franchises.
C. promote monopsony in the hire of professional athletes.
D. increase salaries of professional athletes.

 

53. Which of the following is not correct? 
A. Other things equal, a monopsonist will pay a lower wage rate than will a firm hiring labor competitively.
B. A monopsonistic employer will pay workers a wage rate equal to their MRP.
C. A purely competitive seller will pay workers a wage rate equal to their MRP.
D. An imperfectly competitive seller will employ additional workers as long as the MRP of additional workers exceeds their MRC.

 

54. A monopsonistic employer's marginal resource (labor) cost curve: 
A. is always more elastic than the labor supply curve.
B. coincides with the labor supply curve.
C. lies below the labor supply curve because the higher wage paid to an additional worker must also be paid to all other employed workers.
D. lies above the labor supply curve because the higher wage paid to an additional worker must also be paid to all other employed workers.

 

55. The critical feature of a monopsonistic labor market is that the employer: 
A. has a perfectly elastic demand curve for labor.
B. can hire any number of workers it chooses at the going wage rate.
C. faces an upsloping labor supply curve.
D. faces a perfectly inelastic labor supply curve.

 

56. If a firm is a monopsonist in the hiring of both labor and capital, it will obtain the profit-maximizing quantities of labor and capital when: 
A. MRPL/PL = MRPC/PC = 1.
B. MRPL/MRCL = MRPC/MRCC = 1.
C. the MRP of labor equals the MRP of capital.
D. the MRC of labor equals the MRC of capital.

 

57. If a firm is hiring variable resources D and F in imperfectly competitive input markets, it will maximize profits by employing D and F in such quantifies that: 
A. MRPD/MRCD = MRPF/MRCF = 1.
B. MRPD/MRCD = MRPF/MRCF.
C. MRPD/PD = MRPF/PF = 1.
D. MRPD/PD = MRPF/PF.

 

 Answer the question on the basis of the following supply information facing a single firm in a particular labor market:
  

 

58. Refer to the above information. This labor supply curve demonstrates that: 
A. the firm is selling its output under imperfectly competitive conditions.
B. the firm is selling its output under purely competitive conditions.
C. higher wage rates must be paid to successive workers to overcome their higher opportunity costs.
D. the firm is hiring labor under purely competitive conditions.

 

59. Refer to the above information. The marginal resource (labor) cost of the third worker is: 
A. $15.
B. $25.
C. $35.
D. $45.

 

60. Empirical studies suggest that, other things equal, the smaller the number of hospitals in a city, the lower are nurses' wages. This is evidence that: 
A. the labor markets of nurses are purely competitive.
B. hospitals may possess some degree of monopsony power.
C. the minimum wage does not apply to nurses.
D. labor unions have been ineffective in increasing the wages of nurses.

 

 

   

 

61. If the above diagram were relevant to an individual firm, we could conclude that the firm is: 
A. a pure competitor in the hire of labor.
B. a monopsonist in the hire of labor.
C. selling its product in an imperfectly competitive market.
D. selling its product in a purely competitive market.

 

62. Refer to the above diagram. The MRC curve lies above the labor supply curve because: 
A. any number of workers can be hired at the going equilibrium wage rate.
B. the firm must lower product price to increase its sales.
C. the higher wage needed to attract additional workers must also be paid to the workers already employed.
D. there is an inverse relationship between wage rate and the amount of labor employed.

 

63. Refer to the above diagram. Assuming no union or relevant minimum wage, the firm represented will hire: 
A. Q2 workers and pay a W4 wage rate.
B. Q2 workers and pay a W1 wage rate.
C. Q3 workers and pay a W2 wage rate.
D. Q4 workers and pay a W1 wage rate.

 

 

64. Refer to the above diagram. An industrial (inclusive) union could increase employment in this labor market: 
A. by negotiating any wage rate between W1 and W4.
B. by negotiating a wage rate greater than W4.
C. only if it accepted a wage rate below W1.
D. only if it could shift the labor demand curve rightward.

 

65. Refer to the above diagram. An industrial union could maximize employment by negotiating a wage rate of: 
A. W4.
B. W3.
C. W2.
D. W1.

 

66. Which of the following tactics is most associated with the demand-enhancement union model? 
A. Reducing the price of inputs that are substitutes for union workers.
B. Lobbying for increases in public expenditures on the product it is producing.
C. Restricting the number of workers allowed to work in the industry.
D. Increasing the price of products that are complements for the one it is producing.

 

67. Inclusive unionism is practiced mostly by: 
A. professional and semiprofessional employees.
B. small unions comprised of skilled workers, such as the bricklayers.
C. industrial unions.
D. craft unions.

 

 

   

 

68. Refer to the above diagram. If this labor market is purely competitive, the wage rate and level of employment respectively will be: 
A. D and E.
B. C and E.
C. B and G.
D. B and F.

 

69. Refer to the above diagram. If this labor market is monopsonistic, the wage rate and level of employment respectively will be: 
A. D and E.
B. C and F.
C. B and F.
D. A and F.

70. Refer to the above diagram. Assume that an inclusive union is formed to bargain with the monopsonistic employer of the previous question. To what level can this union increase the wage rate without causing the number of jobs to decline below that which the monopsonist would otherwise have provided? 
A. D minus A
B. D
C. C
D. B

 

71. Refer to the above diagram. If an inclusive union seeks to maximize the number of jobs available for its members, what wage rate will it seek to impose on the monopsonist? 
A. D minus A
B. F
C. C
D. B

 

72. A craft union attempts to increase wage rates by: 
A. equating the MRP and the MRC curves.
B. shifting the labor supply curve to the left.
C. shifting the labor supply curve to the right.
D. shifting the MRP curve to the right.

 

73. Occupational licensing has much the same effect as: 
A. inclusive unionism.
B. exclusive unionism.
C. bilateral monopoly.
D. monopsony.

 

74. Occupational licensing: 
A. functions essentially the same as inclusive unionism.
B. attracts large numbers of workers and therefore depresses wages.
C. often restricts occupational entry and raises the incomes of license holders.
D. has been declared illegal in the majority of states.

 

75. If an exclusive union is successful in restricting the supply of labor, the: 
A. wage rate will rise.
B. quantity of labor demanded will rise.
C. number of job opportunities in the firm or industry will increase.
D. demand for labor curve will shift leftward.

 

76. If an industrial union is formed to bargain with a monopsonistic employer, then in this labor market: 
A. the resulting wage rate will necessarily be above the competitive level.
B. employment may either increase or decrease.
C. employment will increase.
D. employment will decrease.

 

77. The electricians' union is a good example of: 
A. exclusive unionism.
B. an industrial union.
C. how unions can simultaneously increase wage rates and employment by increasing the demand for labor.
D. inclusive unionism.

 

78. Labor unions may attempt to raise wage rates by: 
A. increasing the supply of labor.
B. forcing employers, under the threat of a strike, to pay above-equilibrium wage rates.
C. decreasing the demand for labor.
D. increasing the price of complementary resources.

 

79. Construction workers frequently sponsor political lobbying in support of greater public spending on highways and public buildings. One reason for this is to: 
A. restrict the supply of construction workers.
B. increase the elasticity of demand for construction workers.
C. increase the demand for construction workers.
D. increase the price of substitute inputs.

 

 

80. Craft unions: 
A. attempt to organize workers at all skill levels in a firm or industry.
B. have been declared illegal by Federal legislation.
C. only organize workers who have a particular skill.
D. attempt to increase the supply of their particular type of labor.

 

81. Labor unions are restrained in their wage demands because: 
A. legislation limits annual increases in nominal wages to 6 percent.
B. the labor demand curve is downsloping.
C. marginal wage cost curves lie above labor supply curves in most labor markets.
D. most unions deal with monopsonists who have superior bargaining power.

 

82. In a labor market characterized by bilateral monopoly the wage rate will: 
A. be logically indeterminate.
B. be established at the level desired by the union.
C. be established at the level desired by the employer.
D. always be established at the competitive level.

 

83. If a single large employer bargains with an inclusive union, the resulting labor market model can best be described as: 
A. a cartel.
B. countervailing power.
C. a bilateral monopoly.
D. an internal labor market.

 

84. Bilateral monopoly occurs where: 
A. a monopsonistic employer bargains with an inclusive union.
B. a monopsonistic employer bargains with an exclusive union.
C. a craft union bargains with a purely competitive employer.
D. an industrial union bargains with a purely competitive employer.

 

  

 

 

   

 

85. Refer to the above labor market diagram where D is the labor demand curve, S is the labor supply curve, and MRC is the marginal resource (labor) cost curve. If this were a purely competitive labor market, the equilibrium wage rate and level of employment would be: 
A. $5 and 3 respectively.
B. $6 and 4 respectively.
C. $7 and 5 respectively.
D. $8 and 3 respectively.

 

86. Refer to the above labor market diagram where D is the labor demand curve, S is the labor supply curve, and MRC is the marginal resource (labor) cost curve. If this were a monopsonistic labor market, the equilibrium wage rate and level of employment would be: 
A. $5 and 3 respectively.
B. $6 and 4 respectively.
C. $7 and 5 respectively.
D. $8 and 3 respectively.

 

 

87. Refer to the above labor market diagram where D is the labor demand curve, S is the labor supply curve, and MRC is the marginal resource (labor) cost curve. If an inclusive union was formed and was able to get the monopsonist to agree to a $7 wage rate, then the monopsonist would: 
A. reduce employment from 5 to 3 workers.
B. reduce employment from 5 to 2 workers.
C. increase employment from 3 to 5 workers.
D. not alter its level of employment.

 

88. Refer to the above labor market diagram where D is the labor demand curve, S is the labor supply curve, and MRC is the marginal resource (labor) cost curve. If an inclusive union was able to get the monopsonist to pay a $6 wage rate, then: 
A. the supply curve would be perfectly elastic for the first four workers, but the MRC curve would be unaffected.
B. the supply curve would be perfectly elastic for all workers and the MRC curve would coincide with it.
C. the supply curve would be perfectly elastic for the first four workers and the MRC would be $6 for the first four workers.
D. eight workers would be hired.

 

89. Refer to the above labor market diagram where D is the labor demand curve, S is the labor supply curve, and MRC is the marginal resource (labor) cost curve. An inclusive union could increase the level of employment above that which the monopsonist would provide if it could get the monopsonist to agree to any wage rate: 
A. below $7.
B. between $5 and $8.
C. above $5.
D. above $8.

 

90. Minimum-wage legislation is less likely to have adverse effects on employment when the: 
A. affected labor market is monopsonistic.
B. economy has high unemployment.
C. derived demand for labor is shifting to the left.
D. affected labor market is perfectly competitive.

 

 

91. Critics of minimum-wage legislation argue that it: 
A. keeps inefficient producers in business.
B. reduces employment.
C. undermines incentives to work.
D. is deflationary.

 

92. Many economists are critical of the minimum wage because they believe that it: 
A. hurts the efforts of labor unions.
B. reduces the number of available job opportunities.
C. conflicts with policies designed to equalize the distribution of income.
D. causes labor shortages in affected markets.

 

93. Unions might support a higher minimum wage because: 
A. their constitutions obligate them to do so.
B. they feel a higher minimum wage will lower labor's tax payments for welfare programs.
C. a higher minimum wage makes less-skilled workers less substitutable for union workers.
D. the minimum wage is better targeted than are alternative income-maintenance programs.

 

 

94. If all workers are homogeneous, all jobs are equally attractive to workers, and labor markets are perfectly competitive: 
A. compensating differences would cause wage differentials.
B. noncompeting groups of workers would result in wage differentials.
C. all workers would receive the same wage rate.
D. worker mobility would occur such that wage differentials would widen.

 

95. Wage differentials may result from all the following except
A. differences in the nonmonetary aspects of various occupations.
B. differences in the education and skills of workers.
C. geographic and sociological immobilities of workers.
D. the tendency of qualified workers to move from lower pay jobs to higher pay jobs.

 

96. Suppose all workers are identical, but working for Ajax is more pleasant than working for Acme. In all other nonwage aspects the two firms offer the same job characteristics. We would expect: 
A. wage rates at Ajax to be higher than at Acme.
B. wage rates at Ajax to be lower than at Acme.
C. wage rates at Ajax and Acme to be the same.
D. workers at Ajax would have to be monitored more closely than at Acme.

 

97. Noncompeting groups of workers are the result of: 
A. differences in the age-earnings profiles of workers.
B. differences in the "job tastes" of workers.
C. differences in the innate and acquired abilities of workers.
D. geographic immobilities.

 

98. Compensating differences in wages: 
A. compensate workers for differences in their human capital.
B. are wage differences that compensate for differences in the desirability of jobs.
C. describe the tendency for the wages of all occupations to adjust to the median level.
D. do not exist if jobs have different nonmonetary characteristics.

 

99. Compensating differences in wages pay workers for: 
A. differences in worker training and skills.
B. differences in the nonmonetary characteristics of jobs.
C. geographic immobilities.
D. discrimination in hiring and firing.

 

100. The idea of compensating differences is used: 
A. by inclusive unions as an argument in bargaining for wage rate increases.
B. to justify the application of minimum wages to low-wage labor markets.
C. to explain the divergence between wage rates and marginal resource cost.
D. to explain wage rate differences based on differing nonmonetary aspects of jobs.

 

 

101. The concept of investment in human capital indicates that: 
A. union workers are better educated and more productive than nonunion workers.
B. expenditures on education can be explained in essentially the same way as expenditures on machinery and equipment.
C. worker productivity correlates negatively with annual earnings.
D. the level of education is unrelated to the level of one's income.

 

102. Data on education and earnings reveal: 
A. negative age-earnings profiles for male workers.
B. no relationship between the two.
C. a positive relationship between the two.
D. a negative relationship between the two.

 

103. According to age-earnings data, 
A. lower educated workers have similar earnings at age 65 as higher educated workers.
B. investments in education result in higher earnings.
C. high earnings are due to motivation and innate ability, rather than education.
D. there is no clear relationship between education and worker productivity.

 

 

104. Economists regard expenditures on education as investments because: 
A. they are subject to tax deductions at the same rate as are expenditures on machinery and equipment.
B. education is economically beneficial at the same time it is being acquired.
C. such expenditures are current costs that are intended to enhance future earnings.
D. they differ from expenditures on health and worker mobility.

 

105. Which of the following involves the creation of human capital? 
A. the XYZ Corporation upgrades the machinery on its assembly line
B. Jones receives apprenticeship training as a carpenter
C. Smith buys 30 shares of common stock
D. a retired person decides to reenter the labor force

 

106. Human capital is best defined as: 
A. the productive skills and knowledge that workers acquire from education and training.
B. the substitution of labor for machinery in the production process.
C. any piece of machinery that must be combined with labor to be productive.
D. the exchange of money for real assets.

 

107. Which of the following is a market imperfection that might explain persistent wage differentials within an occupation? 
A. movement of labor from lower-wage to higher-wage jobs
B. readily available information about job opportunities and pay
C. principal-agent problems
D. discrimination

 

108. Which of the following is a market imperfection that might explain persistent wage differentials within an occupation? 
A. geographical immobility of workers
B. readily available information about job opportunities and pay
C. principal-agent problems
D. compensating wage differentials

 

109. Which of the following is not an example of a market imperfection that might explain persistent wage differentials within an occupation? 
A. geographic immobility of workers
B. discrimination
C. noncompeting groups
D. poor information about job opportunities and pay

 

110. Jack and Jill have identical skills and training but Jill earns higher wages in her job. Which of the following reasons would best explain why Jill earns more than Jack? 
A. Jack has a chronic illness and would lose health care coverage if he changed jobs.
B. Jill suffers from gender discrimination in the workplace.
C. Jack has better access to information about available jobs in his field.
D. Jill is reluctant to move to a new city because she wants to live near family.

 

111. In the context of labor markets, shirking refers to: 
A. the nonmonetary disadvantages of certain jobs.
B. the neglecting or evading of work.
C. the elimination of monitoring costs.
D. any scheme where pay is directly related to worker output.

 

112. Traveling sales representative Harold Hill only calls on clients four days a week rather than the five days expected by his employer. This is an example of: 
A. equalizing differences.
B. a nonmonetary job disadvantage.
C. shirking.
D. the free-rider problem.

 

113. The idea of efficiency wages is that: 
A. the wages of each type of labor must be proportionate to their marginal products.
B. the wages of each type of labor must be equal to their marginal products.
C. firms might get greater work effort by paying above-equilibrium wage rates.
D. workers are more diligent when paid below-equilibrium wages.

 

114. Paying an above-equilibrium wage rate might reduce unit labor costs by: 
A. permitting the firm to attract lower-quality labor.
B. increasing the cost to workers of being fired for shirking.
C. increasing voluntary worker turnover.
D. increasing the supply of labor.

 

115. Compensation paid in proportion to the number of units of personal output best describes: 
A. royalties.
B. profit-sharing.
C. bonuses.
D. piece rates.

 

116. A firm might choose to pay its employees a wage higher than that which would clear the market because: 
A. the higher wage raises the opportunity cost of shirking.
B. the higher wage may shift the labor demand curve to the left.
C. the firm will have higher turnover, allowing "new blood" to invigorate older workers who have a greater tendency to shirk.
D. this policy reduces the proportion of experienced to inexperienced workers, resulting in a lower overall wage bill.

 

117. For the firm, the major goal of profit sharing plans is to: 
A. force workers to incur some of the business risk.
B. overcome the monopsony problem of having to pay higher wages to attract additional workers.
C. overcome the principal-agent problem by better aligning the workers' interests with those of the firm.
D. reduce total compensation payments.

 

118. Stock options as a form of payment are designed to: 
A. evade the equal-pay-for-equal work provisions of the Federal antidiscrimination law.
B. boost the overall earnings of minimum wage workers.
C. offset monopsony.
D. address the principal-agent problem.

 

 119. One of the potential negative side-effects of pay in the form of sales commissions is: 
A. a greater incentive for sales people to engage in unethical or fraudulent sales practices that may eventually cause legal problems for the firm.
B. increased volatility of sales revenue for the firm.
C. the potential that pay levels may get so high that they will increase a firm's marginal wage cost more than its marginal revenue product.
D. an increased likelihood of shirking by workers.

 

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[Solved] NORTH EASTERN UNIVERSITY ECON 1001 ECONOMICS 1001 Chap. 013 Wage Determination (GRADE A)

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Chapter 13 Wage Determination WITH ANSWERS Multiple Choice Questions 1. Real wages in the United States in the long run: A. show no discernible relationship to output per worker. B. have increased at about the same rate as increases in output per worker. C. have increased slower than increases in output per worker. D. have increased faster than increases in output per worker. 2. The long-run trend of real wages: A. cannot be determined from available data on nominal wages and the price level. B. has been downward because the price level has risen faster than nominal wages. C. has been upward. D. has been downward because labor's share of the domestic income has fallen. 3. If the nominal wages of carpenters rose by 5 percent in 2010 and the price level increased by 3 percent, then the real wages of carpenters: A. decreased by 2 percent. B. increased by 2 percent. C. increased by 3 percent. D. increased by 8 percent. 4. Over the long run, real earnings per worker can increase only at about the same rate as the economy's rate of growth of: A. total output. B. stock of capital. C. output per worker. D. international trade. 5. Increases in the productivity of labor result partly from: A. the law of diminishing returns. B. improvements in technology. C. reductions in wage rates. D. increases in the quantity of labor. 6. The real wage will rise if the nominal wage: A. falls more rapidly than the general price level. B. increases at the same rate as labor productivity. C. increases more rapidly than the general price level. D. falls at the same rate as the general price level. 7. The productivity and real wages of workers in industrially advanced economies have risen historically partly because: A. workers have acquired less education and training over time. B. workers have been able to use larger quantities of capital equipment. C. over time the capital equipment used by workers has deteriorated in quality. D. the supply of labor has increased. 8. If the nominal wage rises by 4 percent, and the price level rises by 7 percent, the real wage will: A. be unaffected. B. rise by 3 percent. C. fall by 3 percent. D. rise by 11 percent. 9. If the nominal wage rises by 6 percent, and the price level falls by 2 percent, the real wage will: A. be unaffected. B. rise by 4 percent. C. fall by 4 percent. D. rise by 8 percent. 10. Marginal revenue product (MRP) of labor refers to the: A. increase in total revenue resulting from the sale of an additional unit of output. B. amount by which a firm's total resource cost increases when it employs one more unit of labor. C. increase in total revenue resulting from the hire of one more unit of labor. D. price at which additional units of labor can be employed in a monopsonized labor market. 11. Marginal resource cost refers to the: A. increase in total revenue resulting from the sale of the extra output of one more worker. B. price at which additional units of a resource can be hired in an imperfectly competitive resource market. C. increase in total cost resulting from the production of one more unit of output. D. amount by which a firm's total resource cost increases as the result of hiring one more unit of the resource. 12. If a firm is hiring a certain type of labor under purely competitive conditions: A. its labor demand curve will be perfectly elastic at the market-determined wage rate. B. the labor supply curve will lie above the marginal labor cost curve. C. the labor supply and marginal labor (resource) cost curves will coincide and be upsloping. D. the labor supply and marginal labor (resource) cost curves will coincide and be perfectly elastic. 13. The market supply curve for labor is upsloping because: A. of diminishing returns. B. of the opportunity cost of labor in housekeeping, leisure, or alternative employments. C. of declining MRC. D. each employer is a "wage taker." 14. A firm operating in a purely competitive resource market faces a resource supply curve that is: A. perfectly inelastic. B. perfectly elastic. C. highly inelastic. D. highly elastic. 15. A firm that is hiring labor in a purely competitive labor market and selling its product in a purely competitive product market will maximize its profit by hiring labor until: A. marginal revenue product is zero. B. marginal revenue product exceeds marginal resource (labor) cost by the greatest amount. C. marginal resource cost is zero. D. marginal revenue product equals marginal resource (labor) cost. 16. A profit-maximizing firm will: A. expand employment if marginal revenue product exceeds marginal resource cost. B. reduce employment if marginal revenue product exceeds marginal resource cost. C. expand employment if marginal revenue product equals marginal resource cost. D. reduce employment if marginal revenue product equals marginal resource cost. 17. A profit-maximizing firm will: A. expand employment if marginal revenue product equals marginal resource cost. B. reduce employment if marginal revenue product equals marginal resource cost. C. reduce employment if marginal revenue product is less than marginal resource cost. D. expand employment if marginal revenue product is less than marginal resource cost. 18. A firm hiring labor in a perfectly competitive labor market faces a: A. downsloping labor supply curve and upsloping labor demand curve. B. upsloping labor supply curve and downsloping labor demand curve. C. upsloping labor supply curve and horizontal labor demand curve. D. horizontal labor supply curve and downsloping labor demand curve. 19. Refer to the above data. If there is neither a union nor a minimum wage, we can conclude that this firm: A. "purchases" labor in purely competitive labor market. B. is a monopsonist. C. faces a perfectly inelastic labor supply curve. D. has a perfectly elastic labor demand curve. 20. Refer to the above data. In maximizing its profit, this firm will employ: A. 2 units of labor. B. 3 units of labor. C. 4 units of labor. D. 5 units of labor. 21. Refer to the above data. At the profit maximizing level of employment, this firm's total labor cost will be: A. $16. B. $30. C. $24. D. $32. 22. Refer to the above data. At the profit maximizing level of employment, this firm's total revenue will be: A. $16. B. $32. C. $24. D. $30. 23. Refer to the above diagrams. The firm: A. is a monopsonist in the hiring of labor. B. must be selling its product in an imperfectly competitive market. C. is a "wage taker." D. must pay a higher marginal resource cost for each successive worker. 24. Refer to the above diagrams. The firm: A. has a principal-agent problem. B. has a constant marginal resource cost of $5. C. has a marginal resource cost that exceeds the wage rate for each worker. D. will fail to maximize profits if it hires 5 workers. 25. Refer to the above diagrams. The profit-maximizing firm's total wage cost: A. is 0abc. B. is 0Wbc. C. is Wab. D. cannot be determined. 26. Refer to the above diagrams. The profit-maximizing firm's total revenue: A. is 0abc. B. is 0Wbc. C. is Wab. D. cannot be determined. 27. Refer to the above diagrams. At the profit-maximizing level of employment for this firm, the amount available to pay to nonlabor resources: A. is 0abc. B. is 0Wbc. C. is Wab. D. cannot be determined. 28. The individual firm in a purely competitive labor market faces: A. a perfectly elastic labor supply curve and a downsloping labor demand curve. B. a perfectly elastic labor demand curve and an upsloping labor supply curve. C. labor demand and labor supply curves both of which are perfectly elastic. D. a downsloping labor demand curve and an upsloping labor supply curve. 29. Refer to the above data. This firm's product price is: A. $2. B. $3. C. $4. D. $16. 30. Refer to the above data. The marginal revenue product of the second worker is: A. $16. B. $32. C. $8. D. $4. 31. Refer to the above data. The marginal revenue product of the fourth worker is: A. $8. B. $52. C. $2. D. $4. 32. Refer to the above data. We can conclude from the information given that this firm is a: A. pure monopolist. B. discriminating monopolist. C. monopolistic competitor. D. pure competitor. 33. Refer to the above data. If the market wage rate is $8, this firm will employ: A. 2 workers. B. 3 workers. C. 4 workers. D. 5 workers. 34. Refer to the above data. If the market wage rate is $8 and the firm hires its profit-maximizing number of workers, the firm's total wage bill (payment) will be: A. $16. B. $24. C. $32. D. $48. 35. Refer to the above data. If the market wage rate is $8 and the f...
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