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41
Copyright © 2011 Pearson Education, Inc.
25) An increase in the minimum wage to $15 per hour would lead to
A) an increase in search activity for many workers.
B) a decrease in search activity for many workers.
C) a decrease in unemployment.
D) no change in unemployment.
E) no change in employment.
Skill: Level 3: Using models
Section: Checkpoint 7.2
Author: JC
AACSB: Reflective thinking
26) Suppose the marginal benefit the owner of a cherry orchard derives from hiring Lauren to
pick cherries is $8 per hour. If the wage rate that Lauren earns is $7 per hour, then the orchard
owner's surplus from Lauren's labor is ________ per hour.
A) $7
B) $15
C) $1
D) $8
E) $0
Skill: Level 2: Using definitions
Section: Checkpoint 7.2
Author: JC
AACSB: Analytical reasoning
27) The surplus for workers from a job is equal to the
A) marginal cost of work.
B) wage rate.
C) marginal cost of work minus the wage rate.
D) wage rate minus the marginal cost of work.
E) marginal benefit of hiring a worker minus the wage rate.
Skill: Level 1: Definition
Section: Checkpoint 7.2
Author: JC
AACSB: Reflective thinking
42
Copyright © 2011 Pearson Education, Inc.
28) An efficient allocation of labor occurs when the
A) marginal benefit to workers exceeds the marginal benefit to firms.
B) marginal benefit to firms exceeds the marginal benefit to workers.
C) marginal cost to workers is equal to the marginal benefit to firms.
D) marginal cost and marginal benefit of both workers and the firms are equal to zero.
E) marginal benefit of workers exceeds the marginal cost to firms by as much as possible.
Skill: Level 3: Using models
Section: Checkpoint 7.2
Author: SA
AACSB: Analytical reasoning
29) If the minimum wage is set above the equilibrium wage, after taking into account the
resources lost in job search, the firms' surplus ________ and the workers' surplus ________.
A) increases; increases
B) increases; decreases.
C) decreases; increases
D) decreases; decreases
E) does not change; decreases
Skill: Level 2: Using definitions
Section: Checkpoint 7.2
Author: JC
AACSB: Analytical reasoning
30) A minimum wage set above the equilibrium wage
A) decreases the deadweight loss in the market.
B) decreases the workers' surplus because workers must spend resources looking for jobs.
C) increases the firm's surplus.
D) increases the market's efficiency.
E) has no effect on the market.
Skill: Level 2: Using definitions
Section: Checkpoint 7.2
Author: SA
AACSB: Reflective thinking
43
Copyright © 2011 Pearson Education, Inc.
31) A minimum wage that is above the equilibrium wage rate
A) increases efficiency within the labor market.
B) increases the quantity of labor demanded.
C) creates a deadweight loss.
D) has no effect on the labor market because it is set above the equilibrium wage rate.
E) None of the above answers is correct.
Skill: Level 3: Using models
Section: Checkpoint 7.2
Author: TS
AACSB: Reflective thinking
32) The deadweight loss associated with a minimum wage occurs because
A) the minimum wage increases the quantity of labor demanded.
B) the minimum wage decreases the quantity of labor supplied.
C) the minimum wage falls below the equilibrium wage.
D) employment after the minimum wage is less than employment at equilibrium and so the
marginal benefit of more work exceeds the marginal cost.
E) the minimum wage creates a shortage of labor because firms hire fewer workers.
Skill: Level 3: Using models
Section: Checkpoint 7.2
Author: SB
AACSB: Reflective thinking
33) A minimum wage
A) increases all workers' surplus because the wage rate increases.
B) increases consumer surplus because the price of the good decreases.
C) decreases the firms' surplus because fewer workers are hired at the higher wage.
D) increases the firms' surplus and the workers' surplus because it increases the efficiency of the
labor market.
E) None of the above answers is correct.
Skill: Level 4: Applying models
Section: Checkpoint 7.2
Author: TS
AACSB: Analytical reasoning
44
Copyright © 2011 Pearson Education, Inc.
34) Who loses and who gains from the minimum wage?
A) Losers are all workers and gainers are all firms.
B) Losers are all firms and gainers are all workers.
C) Losers are all firms and some workers, while gainers are other workers.
D) Gainers are some firms and all workers, while losers are some firms.
E) Gainers are some firms and some workers, while losers are other firms and other workers.
Skill: Level 3: Using models
Section: Checkpoint 7.2
Author: MR
AACSB: Reflective thinking
35) The people who immediately benefit from a minimum wage are
A) employers who now pay the minimum wage.
B) those people who enter the labor force to search for minimum wage jobs.
C) the workers who retain their jobs after enactment of the minimum wage.
D) everyone, both demanders and suppliers, because the minimum wage benefits everyone.
E) all workers.
Skill: Level 2: Using definitions
Section: Checkpoint 7.2
Author: SB
AACSB: Reflective thinking
45
Copyright © 2011 Pearson Education, Inc.
36) In the figure above, if the wage rate is $6 per hour, then the
A) firms' surplus is the area d + e + f.
B) workers' surplus is the area a + b + c.
C) deadweight loss equals zero.
D) Only answers A and C are correct.
E) Answers A, B, and C are correct.
Skill: Level 4: Applying models
Section: Checkpoint 7.2
Author: SA
AACSB: Analytical reasoning
37) In the figure above, if the minimum wage rate is $8 per hour, then after taking account of
resources lost in job search, the workers' surplus is the area ________ and the firms' surplus is
the area ________.
A) e; c
B) d; b
C) a; f
D) f; a
E) a + b + c + d + e; f
Skill: Level 4: Applying models
Section: Checkpoint 7.2
Author: SA
AACSB: Analytical reasoning
46
Copyright © 2011 Pearson Education, Inc.
38) In the figure above, if the minimum wage is $8 per hour, then
A) resources used in job-search activity increase compared to the situation before the minimum
wage.
B) it is legal to hire workers for a wage below the minimum wage because otherwise
unemployment would result.
C) the deadweight loss is minimized.
D) Both answers A and B are correct.
E) Both answers B and C are correct.
Skill: Level 4: Applying models
Section: Checkpoint 7.2
Author: SA
AACSB: Analytical reasoning
39) The above figure shows a labor market with a minimum wage of $8 an hour. How many
people are employed when the minimum wage is in place?
A) 40,000
B) 60,000
C) 80,000
D) fewer than 40,000
E) more than 80,000
Skill: Level 3: Using models
Section: Checkpoint 7.2
Author: SB
AACSB: Analytical reasoning
47
Copyright © 2011 Pearson Education, Inc.
40) The above figure shows a labor market. Before the minimum wage of $8 an hour is imposed,
employment equals ________ workers; after the minimum wage of $8 an hour is imposed,
employment equals ________ workers.
A) 80,000; 40,000
B) 40,000; 80,000
C) 60,000; 40,000
D) 60,000; 80,000
E) 80,000; 60,000
Skill: Level 3: Using models
Section: Checkpoint 7.2
Author: MR
AACSB: Analytical reasoning
41) The above figure shows a labor market with a minimum wage of $8 an hour. The value of
the resources workers are willing to use in their job search equals the distance between point
________ and point ________.
A) a; d
B) a; b
C) b; c
D) a; c
E) c; d
Skill: Level 3: Using models
Section: Checkpoint 7.2
Author: SB
AACSB: Analytical reasoning
42) The above figure shows a labor market with a minimum wage of $8 an hour. The deadweight
loss equals the
A) area abc.
B) distance ab.
C) distance ad.
D) area bad.
E) area acd.
Skill: Level 2: Using definitions
Section: Checkpoint 7.2
Author: MR
AACSB: Analytical reasoning
48
Copyright © 2011 Pearson Education, Inc.
43) The above figure shows the market for finish carpenters in Bozeman. If there is a minimum
wage set at $18, then there will be
A) unemployment of 200 workers.
B) a surplus of 200 workers.
C) unemployment of 400 workers.
D) a surplus of 400 workers.
E) no unemployment of workers and no surplus of workers.
Skill: Level 3: Using models
Section: Checkpoint 7.2
Author: KG
AACSB: Analytical reasoning
44) The above figure shows the market for finish carpenters in Bozeman. If there is a minimum
wage set at $18, what is true?
A) The lowest wage for which someone is willing to work is $18 an hour.
B) The quantity of jobs increases to 400.
C) The lowest wage for which someone is willing to work is $20 an hour.
D) 200 workers are employed.
E) The quantity of jobs demanded is more than the quantity supplied.
Skill: Level 3: Using models
Section: Checkpoint 7.2
Author: KG
AACSB: Analytical reasoning
49
Copyright © 2011 Pearson Education, Inc.
45) The above figure shows the market for finish carpenters in Bozeman. If there is a minimum
wage set at $18, which of the following statements is true?
A) Firms' surplus increase with the minimum wage.
B) Workers who retain their jobs have their wages rise.
C) The market is efficient.
D) The quantity supplied of workers is less that quantity demanded.
E) Unemployment decreases because firms employ their workers more carefully.
Skill: Level 3: Using models
Section: Checkpoint 7.2
Author: KG
AACSB: Analytical reasoning
46) The above figure shows the market for finish carpenters in Bozeman. There is a minimum
wage set at $18. Compared to the initial equilibrium without the minimum wage, once the
minimum wage is in place and after taking account of job search, the total workers' surplus
________ and the total firms' surplus ________.
A) decreases; increases
B) increases; increases
C) increases; decreases
D) does not change; increases
E) decreases; decreases
Skill: Level 3: Using models
Section: Checkpoint 7.2
Author: KG
AACSB: Analytical reasoning
50
Copyright © 2011 Pearson Education, Inc.
47) The above figure shows a labor market with minimum wage equal to $16. In this figure,
what area equals the firms' surplus?
A) area A
B) area B
C) area C
D) area D
E) area E
Skill: Level 3: Using models
Section: Checkpoint 7.2
Author: KG
AACSB: Analytical reasoning
48) The above figure shows a labor market with minimum wage equal to $16. In this figure,
after taking account of search costs, what area equals the workers' surplus?
A) area A
B) area B
C) area C
D) area D
E) area E
Skill: Level 3: Using models
Section: Checkpoint 7.2
Author: KG
AACSB: Analytical reasoning
