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Economics
Chapter 11
| Question | Answer |
|---|---|
| Suppose you have worked at a local sandwich shop for six months and now you plan to ask your manager for a raise. How can you convince your manager that you are worth more money than you are currently being paid? | by demonstrating to your manager the marginal revenue product your employment contributes to the sandwich shop |
| Let MP = marginal product, P = output price, and W = wage, then the equation that represents the condition where a competitive firm would hire another worker is | P × MP > W |
| Marginal revenue product for a perfectly competitive seller is equal to | Marginal revenue product for a perfectly competitive seller is equal to |
| A reason why a perfectly competitive firm's demand for labor curve slopes downward is that | in the short run, as more labor is hired, labor's marginal product falls because of the law of diminishing returns |
| The demand for labor depends primarily on the additional output produced as a result of hiring an additional worker and | the additional revenue received from selling the output produced as a result of hiring an additional worker |
| If a worker can produce 20 units of output which can be sold for $4 per unit, what is the maximum wage that firm should pay to hire this worker? | $80 |
| The firm's gain in profit from hiring another worker is | the difference between marginal revenue product and the wage of the worker |
| Marginal revenue product of labor for a competitive seller is | equal to the marginal product of labor multiplied by the output price. |
| The demand for labor is described as a derived demand because | it is derived from the demand for products that use labor in the production process |
| What is the difference between labor's marginal product and marginal revenue product? | The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue |
| A decrease in the wage rate causes | an increase in the quantity of labor demanded |
| The term "derived demand" refers to | the demand for a factor of production that is derived from the demand for the good the factor produces |
| Which of the following correctly identifies the difference between the demand for labor and the demand for final goods? | The demand for labor is derived from the demand for final goods, whereas the demand for final goods is independent of the demand for labor |
| An increase in a perfectly competitive firm's demand for labor could be caused by | an increase in the market demand for the firm's product |
| Which of the following will not cause the labor demand curve to shift? | an increase in human capital in the labor force |
| An increase in the supply of capital, which is a substitute to labor, will lead to a decrease in the demand for labor | True |
| An increase in the price of grape juice causes an increase in the marginal revenue product of labor used to produce grape juice | True |
| An increase in the demand for orthodontic services leads to | an increase in the demand for orthodontists. |
| Personal-injury and medical-malpractice cases have been undercut by state laws limiting class-action suits, and securities class-action litigation has declined in part because of a buoyant stock market. How does this affect the market for lawyers? | The demand for lawyers shifts to the left |
| Technological advancements that increase labor's productivity shift the labor supply curve to the right | False |
| Which of the following statements is true? | The income effect and the substitution effect of a wage rate change work in opposite directions |
| The substitution effect of a wage decrease examines the effect of the decrease in wage income on a worker's ability to consume goods and services | False |
| At low wages, the labor supply curve for most people slopes upward because | as wages increase the opportunity cost of leisure increases |
| The labor supply for an industry would decrease if | the percentage of the population from age 16 to 65 decreases |
| An individual's labor supply curve shows | the relationship between wages and the quantity of labor that she is willing to supply |
| The wage rate is the opportunity cost of | leisure |
| The income effect of a wage increase is observed when | the higher wage income causes workers to take more leisure and work less |
| The combined effect (both income and substitution) of a wage increase is that | if the substitution effect outweighs the income effect, the labor supply curve slopes upward, but if the income effect outweighs the substitution effect, the labor supply curve is backward bending |
| An increase in wages raises the opportunity cost of leisure and leads to an increase in the quantity of labor supplied | True |
| If Alan Shaw reduces his work hours when his salary increases, then | income effect of his salary increase dominates the substitution effect |
| Which of the following is likely to cause a decrease in the wage rate and an increase in the employment level of a country | A right shift in the supply curve for labor, without any change in the demand curve for labor |
| What happens to the equilibrium wage and quantity of labor if output price rises? | The equilibrium wage and the equilibrium quantity of labor rise |
| How will an increase in labor productivity affect equilibrium in the labor market | The demand for labor will increase and the equilibrium wage and quantity of labor will increase |
| Other things remaining the same, which of the following is likely to cause a left shift in the supply curve for labor | A decrease in population |
| Other things remaining the same, which of the following is likely to cause a decrease in both the wage rate and the number of workers hired in a glass factory? | The introduction of labor-saving technology in the factory |
| In situations where new technologies are considered substitutes for workers, demand for these workers will ________, resulting in ________ in the equilibrium wage | decrease; a decrease |
| Which of the following is likely to lead to a left shift in the supply curve for labor to a firm? | The establishment of a new firm nearby that offers higher wages |
| Which of the following is likely to cause an increase in the wage rate and a fall in the employment level in a country? | A left shift in the supply curve for labor, without any change in the demand curve for labor |
| If an industry introduces a labor-saving technology in production, the demand curve for labor in that industry is likely to | shift to the left |
| In situations where new technologies are considered complementary to workers, demand for these workers will ________, resulting in ________ in the equilibrium wage | increase; an increase |
| A person's stock of skills to produce economic value is referred to as | human capital |
| Compensating differentials are associated most closely with which of the following? | hazardous jobs |
| Sarah is a high school graduate and James is a college graduate. Which of the following statements is true | James is likely to have more human capital than Sara |
| One reason why the average salary of Major League Baseball players is higher than the average salary of college professors is | the marginal revenue product of baseball players is greater than the marginal revenue product of college professors |
| Some superstar athletes in the sports industry earn very high levels of income relative to other occupations, and over time the wage differential has been increasing. What could have caused this? | Technological advances such as cable television has increased the demand for sports entertainment |
| Compensating differentials are | higher wages that compensate workers for unpleasant aspects of a job |
| Painters who paint water towers earn higher wages relative to painters who paint houses because | painting water towers is more risky than painting houses |
| The most important factor contributing to wage differences in the labor market is differences in the level of education and training among workers. | True |
| Higher wages that compensate workers for unpleasant aspects of a job are called compensating differentials. | True |
| Which of the following explains why talented major league baseball players command much higher salaries than neurosurgeons? | because the supply of talented major league baseball players is low relative to its demand compared to the supply of neurosurgeons. Therefore, adding another player yields far greater marginal benefit than adding another neurosurgeon |
| Which of the following correctly identifies a difference between taste-based discrimination and statistical discrimination? | Employers engaging in taste-based discrimination are willing to forego profits, whereas employers engaging in statistical discrimination are trying to enhance profits. |
| Women typically earn less than men, even in the same occupation. Which of the following is an explanation for this discrepancy | Women have, on average, less workforce experience than men of the same age |
| Employers engaging in ________ try to enhance their profits | statistical discrimination |
| Discrimination that occurs when people's preferences cause them to discriminate against a certain group is referred to as | taste-based discrimination |
| Which of the following statements is true? | Employers are willing to forego profits when engaging in taste-based discrimination |
| Worker discrimination occurs when | workers refuse to work with persons of a different race |
| Which of the following is a likely reason for wage inequality between men and women? | Women tend to spend more time out of the labor force as compared to men |
| Customer discrimination occurs when | customers refuse to buy products produced by a racially diverse workforce |
| Which of the following is a reason why it is difficult to estimate the extent of economic discrimination in the labor market | Differences in wages can be attributed to many other factors as well, such as differences in productivity and preferences |
| Most economists believe that a small amount of the gap between the wages of white males and the wages of other groups is due to discrimination. Which of the following factors is not another factor that explains part of this gap? | geographic location |
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annalise123