Quiz
Labor Econ
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Questions in this quiz (43)
1The cost of producing a given level of output is minimized:
- AWhere the ratio of input prices equals the marginal rate of technical substitution.
- BWhere the ratio of input prices equals the slope of the isocost.
2The marginal rate of technical substitution at any particular labor-capital bundle is
- AThe slope of the indifference curve.
- BThe slope of the isoquant.
3What is an example of the substitution effect?
- AThe firm hires more labor when the wage falls because labor has become relatively cheaper compared to the price of other factors of production.
- BThe firm expands output when production costs increase.
4The short-run production function typically:
- AShows the relationship between the level of output produced and the amount of capital employed, all else equal.
- BShows the relationship between the level of output produced and the number of employee-hours hired, all else equal.
5The scale effect refers to:
- AFirms wanting to produce more output when a factor price falls.
- BFirms substituting towards the factor input that has become relatively cheaper.
6Assume that for the last worker hired, MPE = 6, p = $2, and w = $10. If one more worker is hired, then MPE = 4, p = $2, and w = $10. The implication is what?
- AA competitive firm should increase employment.
- BA competitive firm should decrease employment.
- CA competitive firm should leave employment unchanged.
7The slope of the production function while holding capital fixed is
- AThe marginal product of labor.
- BThe marginal product of capital.
8What is the marginal productivity condition of a profit-maximizing firm?
- AThe firm should produce up to the point where the marginal cost of hiring an additional unit of labor equals the cost of selling one more unit of output.
- BThe firm should produce up to the point where the cost of producing an additional unit of output is equal to the revenue from selling an additional unit of output.
9The marginal product of labor:
- AEventually diminishes as the capital stock is fixed.
- BInitially increases with the quantity of labor because of specialization.
- CIs the slope of the short-run production function.
- DDiminishes after the inflection point on the total product curve.
- EAll of these are correct.
10Ally owns a shoe store. The market wage is $10 per hour, and the cost of capital is $2 per week for every $1,000 of capital borrowed. Consider the isocost line associated with spending $8,000 per week, and let the y-axis be the amount of capital borrowed in $1,000s. Which of the following is not true?
- AIf Ally employs 600 hours of work, she can borrow $1 million of capital.
- BIf Ally employs 400 hours of work, she can borrow $3 million of capital.
- CIf Ally employs no workers, she can borrow $4 million of capital.
11At a wage of $25 per hour, the firm employs 50,000 hours of labor per week. If the wage would increase to $27 per hour, the firm would employ 45,000 hours of labor per week. What is the elasticity of labor demand?
- A-1.25.
- B-1.50.
12 In the long run, a firm hires labor and capital such that all of the following hold except:
- AThe firm minimizes its factor payments.
- BFirm profits are maximized.
- CThe value of the marginal product of labor divided by the wage equals the value of the marginal product of capital divided by the price of capital.
13In the short run, the demand for labor for a competitive firm is:
- AThe value of the marginal product of labor curve.
- BThe downward-sloping portion of the marginal product curve.
14How does a profit-maximizing firm that is operating in a competitive labor market respond to an increase in the wage rate?
- AThe firm will demand more capital due to the scale effect.
- BThe firm will produce less output due to the scale effect.
15What is an example of the scale effect?
- AThe firm expands output when production costs fall.
- BThe firm hires more labor when the wage falls because labor has become relatively cheaper compared to the price of other factors of production.
16What is an example of the substitution effect?
- AThe firm hires more labor when the wage falls because labor has become relatively cheaper compared to the price of other factors of production.
- BThe firm expands output when production costs fall.
17Labor demand is more elastic
- AThe greater is labor's share in total costs.
- BThe greater is the elasticity of demand for the firm's output.
- CThe greater is the elasticity of substitution between labor and capital.
- DThe greater is the supply elasticity of capital.
- EAll of the above
18In a competitive industry, the profit-maximizing amount of labor occurs where:
- AThe value of the marginal product of labor intersects the labor supply curve and the value of the total product of labor equals total revenue.
- BMarginal cost equals marginal revenue and the value of the marginal product of labor intersects the labor supply curve.
19Why is the short-run labor demand curve less elastic relative to the long-run labor demand curve?
- ABecause firms are better able to substitute capital for labor in the long run compared to the short run.
- BBecause firms care about changes in wages in the short-run but not in the long-run.
20The cost of offering safe versus risky jobs in the highway construction industry vary across firms. In the end, we would expect the market equilibrium to
- AHave firms that face a high cost of offering safe jobs to pay the lowest wages.
- BMatch workers who dislike risk to firms that find it cheapest to offer safe jobs.
21Which of the following is NOT an accurate summary of the equilibrium associated with a single competitive labor market?
- ATotal economic surplus is maximized.
- BTotal firm surplus equals total worker surplus.
22If the minimum wage applies to one sector (the covered sector) but not another sector (the uncovered sector), an increase in the minimum wage in the covered sector is likely to result in which of the following?
- AA lower wage in the uncovered sector.
- BA lower wage in the covered sector.
23Having the government regulate work-place safety would most likely improve economic efficiency if:
- AWorkers are unable to correctly judge the risk associated with a particular job.
- BFirms and workers differ on the value they place on safe versus risky jobs.
24If 1 in 20,000 miners is killed on the job each year while 1 in 30,000 truck drivers is killed on the job each year, what is the statistical value of a life if the average miner salary is $54,000 while the average truck driver salary is $52,000?
- A$100 million
- B$120 million
25The Hedonic Wage Function is the:
- ACollection of wage and job characteristics that make an individual indifferent across various jobs.
- BEquilibrium relationship between wages and job characteristics arising from the interaction of workers and firms.
26The market-clearing wage differential between a safe and a risky job is $5,000. Which of the following is NOT true?
- AThe marginal worker is indifferent between working the safe or the risky job.
- BAll but the marginal worker in safe jobs require a wage differential above $5,000 to accept a risky job.
- CAll but the marginal worker in the risky job require a wage differential below $5,000 to be indifferent between safe and risky jobs.
- DThe per-worker cost for any firm to change technologies to offer safe jobs in place of risky jobs is $5,000.
27Economic analysis of the value of a life suggests that:
- AThe trade-off between wages and the number of fatal accidents in the workplace implies an implicit value workers would pay to save a life.
- BWorkplace safety does not affect wages.
28Which of the following is NOT a property of isoprofit curves graphed in Probability of Injury (x-axis) versus Wage (y-axis) space?
- AIsoprofit curves going out along the x-axis yield higher profits.
- BIsoprofit curves going up along the y-axis yield higher profits.
- CIsoprofit lines are upward sloping.
29Suppose there are two types of jobs-safe and risky. Safe jobs currently pay $10 per hour. Risky jobs currently pay $20 per hour. The government intervenes in the market, mandating that all firms offer safe jobs and pay a wage of $10 per hour. Which of the following is true?
- AFirms that originally offered safe jobs are hurt by the policy.
- BFirms that originally offered risky jobs are hurt by the policy.
30A potential implication of OSHA regulation is that
- AThe hedonic wage function may no longer exist at the riskiest levels.
- BThe hedonic wage function may no longer exist at the safest levels.
31Suppose 1 in 200 pilots flying Space-X aircraft dies each year while only 1 in 500 pilots flying Subspace Gliders dies each year. Moreover, the average salary of Space-X pilots is $115,000, while the average salary of Subspace Glider pilots is $109,000. Given this information, what is the implied statistical value of a life of a pilot?
- A$1,200,000
- B$2,000,000
32In the context of risky jobs, the worker’s reservation price is:
- AThe amount by which a worker's wage would have to be increased in order for the worker to willingly switch from a safe to a risky job.
- BThe amount by which a worker's wage would have to be increased in order for the worker to willingly switch from a risky to a safe job.
33Competitive factor and product markets lead to:
- AMaximum producer surplus.
- BMaximum total surplus.
34The equilibrium of a competitive labor market is associated with
- ANo unemployment as everyone who wants a job at the equilibrium wage has one.
- BSome unemployment as some people do not have a job at the equilibrium wage.
35A negative compensating differential for a risky job can result if:
- ASome workers like risk and the demand for labor in risky jobs is relatively small.
- BThe supply of workers who dislike risky jobs is large relative to the demand for workers willing to work a risky job.
36A hedonic wage function could be applied to which of the following job characteristics?
- AThe probability of being injured on the job.
- BThe degree to which a job involves strenuous work.
- CThe degree to which the area surrounding the job location is safe.
- DThe degree to which a job involves monotonous work.
- EAll of the above can be represented with a hedonic wage function.
37Under normal circumstances, the equilibrium compensation wage differential is the wage differential that exactly attracts
- AThe marginal worker into a risky job.
- BThe marginal worker into the labor market.
38The supply curve of labor to risky jobs reveals:
- AHow many workers are willing to offer their labor to the risky job as a function of the wage paid to workers of the safe job.
- BHow many workers are willing to offer their labor to the risky job as a function of the wage differential between the risky job and the safe job.
39In order for the compensating differential associated with a risky job to be negative (so that a risky job pays less than a non-risky job), it must be that:
- AMost workers prefer the risky job to the safe job when both wages are equal.
- BThe number of risky jobs is less than the number of workers who prefer the risky job.
40How would imposing a minimum wage above the market clearing wage affect employment in a competitive labor market?
- AEmployment would increase because a higher minimum wage would create more jobs for low-skilled workers.
- BEmployment would decrease as some workers who are willing to work at the lower competitive wage would no longer be able to find work.
41Which of the following would prevent a single equilibrium wage existing across all labor markets?
- AWorkers having various skills and preferences.
- BA payroll tax paid equally by workers and firms.
42When graphing a worker's indifference curves in Probability of Injury (x-axis) versus Wage (y-axis) space, Al's indifference curves are steeper than Pete's indifference curve. In this case:
- AAl requires a greater wage increase than Pete in order to willingly take on more risk.
- BAl is more risk-loving than Pete.
43Assume that the market clearing wages are $10 per hour in a safe job and $18 per hour in a risky job. Then, at the completion of a war, many ex-soldiers who enjoy risky ventures enter the labor market. Which of the following is NOT a likely outcome of this change?
- AMany firms that currently offer risky jobs will begin offering safe jobs.
- BThe wage associated with risky jobs will decrease.
- CThe fraction of people working safe jobs will decrease.
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- Joshua Warner
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