1. The more work people do, all other things unchanged, the: A) more their free time. B) greater their nonmarket use of time. C) less income they have. D) less leisure they have. 2. A wage will the leisure. A) lower; increase; opportunity cost of B) higher; always decrease; amount of time spent on C) higher; increase; opportunity cost of D) lower; not affect; amount of time spent on 3. Gabriella often faces a trade-off between time at the beach and time working as a model. She earns $40 per hour as a model and values going to the beach at the same price. When explaining this to her parents, she says, ìthe marginal utility per hour working is the same as the marginal utility per hour of going to the beach.î This is an illustration of: A) indifference curves. B) the substitution effect. C) the income effect. D) optimal time allocation. 4. John is an entrepreneur who owns an auto body repair shop. John's business is booming, and his salary is rising. John's labor supply curve will be if the substitution effect is the income effect. A) upward-sloping; smaller than B) downward-sloping; smaller than C) horizontal; equal to D) vertical; greater than 5. Suppose Professor Jones receives a promotion and an increase in her annual salary. Her labor supply curve will be if the substitution effect is than the income effect. A) upward-sloping; greater than B) upward-sloping; smaller than C) downward-sloping; greater than D) vertical; greater than
6. Lisa works 46 hours a week at $10 an hour. If her wage increases to $16.50: A) the substitution effect implies that she will work less. B) if leisure is a normal good, the income effect implies that she will work less. C) if leisure is a normal good, the income effect will reinforce the substitution effect and she will work less. D) Lisa's marginal product of labor has decreased. 7. Beyond some point, a higher wage may induce an individual to work, and the labor supply curve may then. A) more; bend backward B) less; bend backward C) more; slope downward D) harder; become vertical 8. Consider the labor market for accountants. As more people earn accounting degrees, we should expect to see: A) a shift to the right of the labor supply curve. B) a shift to the right of the labor demand curve. C) an increase in labor along a stable labor supply curve. D) an increase in labor along a stable labor demand curve. 9. An increase in wealth will cause the labor supply curve to: A) shift leftward if leisure is a normal good. B) slope downward if the substitution effect dominates the income effect. C) slope upward if leisure is an inferior good. D) bend backward if the income effect outweighs the substitution effect of a change in wealth and if leisure is a normal good. 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. The market supply curve for labor is upsloping because: A. of diminishing returns. B. employers as a group must pay higher wage rates to obtain more workers. C. of declining MRC. D. each employer is a "wage taker."
12. 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. 13. 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. 14. 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. 15. Refer to the given data. If there is neither a union nor a minimum wage, we can conclude that this firm: A. "purchases" labor in a purely competitive labor market. B. is a monopsonist. C. faces a perfectly inelastic labor supply curve. D. has a perfectly elastic labor demand curve.
16. Refer to the given data. At the profit-maximizing level of employment, this firm's total labor cost will be: A. $16. B. $30. C. $24. D. $32. 17. Use the labor demand data on the left and the labor supply data on the right in answering the following question: Refer to the given data. The labor supply curve facing firms is: A. such that it does not intersect the labor demand curve. B. upsloping. C. perfectly inelastic. D. perfectly elastic. 18. Refer to the 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.
19. Refer to the given data. The marginal revenue product of the fourth worker is: A. $8. B. $52. C. $2. D. $4. 20. Refer to the given data. If the market wage rate is $8, this firm will employ: A. 2 workers. B. 3 workers. C. 4 workers. D. 5 workers. 21. 1. W < MRP; W < MRC 2. W = MRP; W < MRC 3. W = MRP; W = MRC 4. W > MRP; W > MRC Refer to the list. The outcome in a purely competitive labor market is shown by: A. 1. B. 2. C. 3. D. 4.
22. 1. W < MRP; W < MRC 2. W = MRP; W < MRC 3. W = MRP; W = MRC 4. W > MRP; W > MRC Refer to the list. The outcome in a monopsony labor market is shown by: A. 1. B. 2. C. 3. D. 4. 23. Use the resource demand data shown on the left and the resource supply data on the right in answering the following question: Refer to the given data. How many workers will this profit-maximizing firm choose to employ? A. 6. B. 5. C. 4. D. 3. 24. Use the resource demand data shown on the left and the resource supply data on the right in answering the following question: Refer to the given data. How many units of output will this profit-maximizing firm produce? A. 39. B. 48. C. 55. D. 60.
25. Use the resource demand data shown on the left and the resource supply data on the right in answering the following question: Refer to the given data. What will be the profit-maximizing wage rate? A. $6. B. $5. C. $4. D. $3. 26. Use the resource demand data shown on the left and the resource supply data on the right in answering the following question: Refer to the given data. We can conclude that: A. both the product and resource markets are imperfectly competitive. B. the resource market is imperfectly competitive, but the product market is purely competitive. C. both the resource and product markets are purely competitive. D. the resource market is purely competitive, but the product market is imperfectly competitive. 27. 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.
28. In monopsony: A. each firm employs a small portion of the total supply of labor. B. the workforce 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." 29. 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. 30. 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. 31. 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.
32. If the 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. 33. Refer to the 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.
34. Refer to the 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. 35. Refer to the 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. 36. If the minimum wage is set too high, in some labor markets we can expect to see: A. a shortage of labor. B. an increase in on-the-job training. C. a surplus of labor. D. a decline in wage costs.
37. 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. 38. Compensating differences in wages, pay workers for: A. differences in worker training and skills. B. differences in the nonmonetary characteristics of jobs. C. geographic immobility. D. discrimination in hiring and firing. 39. 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. 40. 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. 41. 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. 42. The principal-agent problem arises primarily because: A. principals and agents share a common interest, leading to free-rider problems. B. principals and agents are in an adversarial role, sharing no common interests. C. principals pursue some of their own objectives, which may conflict with the objectives of the agents. D. agents pursue some of their own objectives, which may conflict with the objectives of the principals.
43. Which one of the following best exemplifies the principal-agent problem in the employeremployee relationship? A. A worker takes 20-minute coffee-breaks although the employer allots only 15 minutes for this purpose. B. A worker is on the job 50 hours per week although only 40 hours are required for promotion. C. A worker opts for early retirement in response to the firm's incentive plan. D. A worker's productivity is independent of the wage paid. 44. 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. 45. 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.