84) For a household, the opportunity cost of not working is the
A) nominal wage rate.
B) real wage rate.
C) cost of living.
D) price level.
E) demand for labor.
Skill: Level 1: Deinition
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
85) Which of the following statements is (are) true?
i. As the real wage rate increases, the household’s income decreases, which inluences
people to work more hours.
ii. As the real wage rate increases, the quantity of labor demanded increases.
iii. As the real wage rate increases, the opportunity cost of not working increases.
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
Skill: Level 1: Deinition
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
86) As demonstrated by the labor supply schedule, the quantity of labor supplied depends
on
A) the nominal wage.
B) the amount of labor that irms want to hire.
C) the real wage.
D) the value of the dollar.
E) workers’ productivity.
Skill: Level 1: Deinition
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
31
87) The supply of labor is deined as the relationship between the real wage rate and the
A) quantity of labor supplied by irms.
B) amount of jobs supplied by irms.
C) quantity of labor supplied by households.
D) amount of jobs supplied by households.
E) equilibrium quantity of employment.
Skill: Level 1: Deinition
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
88) Which of the following statements is true?
A) According to the labor supply curve, as the real wage rises, employers are willing to
provide more jobs.
B) According to the labor supply curve, as the real wage rises, workers are willing to
provide more hours of labor.
C) According to the labor supply curve, as the real wage rises, employers are willing to
provide fewer jobs.
D) According to the labor supply curve, as the real wage rises, workers are willing to
provide fewer hours of labor.
E) According to the labor supply curve, as the real wage rises, more workers leave the
labor force.
Skill: Level 1: Deinition
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
89) Households increase the quantity of labor supplied when the
A) real wage rate rises because the opportunity cost of not working falls.
B) nominal wage rate rises because the real wage rate must also rise.
C) real wage rate rises because the opportunity cost of not working rises.
D) nominal wage rate falls because the opportunity cost of not working rises.
E) income tax rises because an increase in the income tax increases the demand for labor.
Skill: Level 2: Using deinitions
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
32
90) Households increase the quantity of labor supplied when
A) the real wage rate increases.
B) the real wage rate decreases.
C) job opportunities increase.
D) the nominal wage decreases and the price level rises.
E) income taxes increase.
Skill: Level 2: Using deinitions
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
91) Holding all other inluences constant, the quantity of labor supplied in a given time
period depends
A) inversely on the real wage rate so that a higher real wage decreases the quantity of
labor supplied.
B) directly on the real wage rate so that a higher real wage increases the quantity of labor
supplied.
C) inversely on the quantity of labor demanded.
D) on the money wage rate not the real wage rate.
E) directly on the quantity of labor demanded.
Skill: Level 2: Using deinitions
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
92) When all other inluences on work plans remain the same, the
A) lower the real wage rate, the smaller the quantity of labor supplied.
B) higher the real wage rate, the greater the quantity of labor demanded.
C) lower the real wage rate, the greater the quantity of labor supplied.
D) lower the real wage rate, the smaller the quantity of labor demanded.
E) lower the real wage rate, the larger the labor force participation.
Skill: Level 1: Deinition
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
33
93) The quantity of labor supplied increases as the real wage rises because
A) higher real wages mean that nominal wages have increased.
B) the opportunity cost of working increases.
C) the quantity of labor demanded increases.
D) the opportunity cost of leisure rises.
E) labor force participation decreases so that only serious workers are left in the labor
force.
Skill: Level 1: Deinition
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
94) As the real wage rate rises, the opportunity cost of
A) working rises.
B) saving rises.
C) leisure rises.
D) leisure falls.
E) buying goods and services rises.
Skill: Level 1: Deinition
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
95) The labor force participation rate
A) increases as the real wage increases.
B) decreases as the real wage increases.
C) has nothing to do with the real wage rate.
D) increases as the opportunity cost of working increases.
E) is one of the major reasons that irms pay eiciency wages.
Skill: Level 1: Deinition
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
34
96) The labor market is in equilibrium whenever
A) the nominal wage rate is decreasing.
B) the nominal wage rate is increasing.
C) the nominal wage rate is not changing.
D) the real wage rate is increasing.
E) the quantity of labor demanded equals the quantity of labor supplied.
Skill: Level 1: Deinition
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
97) A surplus of labor is eliminated by ________ in the real wage rate and a shortage of labor
is eliminated by ________ in the real wage rate.
A) an increase; an increase
B) an increase; a decrease
C) a decrease; an increase
D) a decrease; a decrease
E) None of the above answers is correct because shortages and surpluses are eliminated by
changes in the demand for labor and the supply of labor, not the wage rate.
Skill: Level 2: Using deinitions
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
98) A surplus in the labor market indicates that the
A) real wage rate is above the equilibrium wage rate but it is too low to eliminate the
surplus of labor.
B) quantity of labor demanded is less than the quantity of labor supplied.
C) real wage rate has to rise before the labor market will reach equilibrium.
D) workers are not looking for work because they enjoy their leisure time.
E) real wage rate is less than the equilibrium wage rate.
Skill: Level 2: Using deinitions
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
35
99) When the labor market is in equilibrium so that the quantity of labor supplied equals
the quantity demanded,
A) there is no unemployment.
B) the economy is at full employment.
C) nominal GDP equals real GDP.
D) there is no inlation.
E) real GDP might be more than, less than, or equal to potential GDP.
Skill: Level 1: Deinition
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
100) When the labor market is in equilibrium,
i. the quantity demanded of labor equals the quantity supplied.
ii. there is full employment.
iii. potential GDP is produced.
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
Skill: Level 2: Using deinitions
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
101) When the labor market is in equilibrium,
A) there is excess labor supplied, which keeps real GDP less than potential GDP.
B) there is full employment, which means that real GDP equals potential GDP.
C) the real wage rate falls to equal the nominal wage rate because real GDP is greater than
potential GDP.
D) the real wage rate rises to allow real GDP to equal potential GDP.
E) there is full employment but real GDP might be greater than, less than, or equal to
potential GDP.
Skill: Level 2: Using deinitions
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
36
102) In a labor market without an eiciency wage, minimum wage, or union wage, when
the real wage rate exceeds the equilibrium real wage rate, there is a ________ of labor and
the real wage rate will ________.
A) surplus; fall
B) shortage; fall
C) shortage; rise
D) surplus; rise
E) surplus; not change because only eiciency wages or union wages can change.
Skill: Level 2: Using deinitions
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
103) The table above shows the labor demand and labor supply schedules for a nation. The
equilibrium real wage rate is ________ and the equilibrium quantity of labor is ________
billions of hours per year.
A) $25; 260
B) $20; 280
C) $20; 260
D) $15; 260
E) $40; 320
Skill: Level 3: Using models
Section: Checkpoint 8.1
Status: Old
AACSB: Analytical thinking
37
104) The tables above show a nation’s labor demand and labor supply schedules and its
production function. The equilibrium real wage rate is ________ and the equilibrium quantity
of labor is ________ billion hours per year.
A) $50; 100
B) $40; 90
C) $30; 80
D) $40; 80
E) $20; 110
Skill: Level 3: Using models
Section: Checkpoint 8.1
Status: Old
AACSB: Analytical thinking
105) The tables above show a nation’s labor demand and labor supply schedules and its
production function. Given the equilibrium in the labor market, potential GDP is
A) $3.0 trillion.
B) $3.7 trillion.
C) $4.2 trillion.
D) $4.5 trillion.
E) $2.0 trillion.
Skill: Level 3: Using models
Section: Checkpoint 8.1
Status: Old
AACSB: Analytical thinking
38
106) In the United States between the 1970s and the 2000s, the productivity of labor
increased. This increase led to
A) an increase in the demand for labor.
B) an increase in the supply of labor.
C) a downward shift of the production function.
D) a decrease in the supply of labor.
E) no change in either the demand for or the supply of labor.
Skill: Level 4: Applying models
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
107) ________ adopts the view that aggregate luctuations are a natural consequence of an
expanding economy.
A) Classical macroeconomics
B) Keynesian economics
C) The new macroeconomics
D) The Lucas Wedge
E) The Okun Gap
Skill: Level 1: Deinition
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
108) Potential GDP
A) is the quantity of GDP produced when the economy is at full employment of all
resources.
B) can never be exceeded.
C) can never be attained.
D) is another name for real GDP.
E) is another name for nominal GDP.
Skill: Level 1: Deinition
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
39
109) With ixed quantities of capital, land, and entrepreneurship and ixed technology, the
amount of real GDP produced increases when ________ increases.
i. the quantity of labor employed
ii. the inlation rate
iii. the price level
A) i only
B) ii only
C) iii only
D) ii and iii
E) i, ii, and iii
Skill: Level 2: Using deinitions
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
110) The production function graphs the relationship between
A) nominal GDP and real GDP.
B) real GDP and the quantity of labor employed.
C) real GDP and capital.
D) nominal GDP and the quantity of labor employed.
E) real GDP and the supply of labor.
Skill: Level 1: Deinition
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
111) The quantity of labor demanded deinitely increases if the
A) real wage rate rises.
B) real wage rate falls.
C) nominal wage rate rises.
D) nominal wage rate falls.
E) supply of labor decreases.
Skill: Level 2: Using deinitions
Section: Checkpoint 8.1
Status: Old
AACSB: Relective thinking
40