57) The price of capital falls. Assuming that the firm does not increase the quantity it produces,
in the long run the firm’s demand for labor curve
A) does not shift and there is no movement along it.
B) shifts leftward.
C) shifts rightward only if the elasticity of demand for labor is elastic.
D) does not shift but there is a movement along it.
E) shifts rightward only if the elasticity of demand for labor is inelastic.
58) The above figure shows the demand for labor curve for workers at the local Pizza Hut. If the
wage rate is $6 per hour, then the
i. quantity of workers Pizza Hut demands is 10 workers.
ii. Pizza Hut would have been willing to hire the 6th worker even if they had to pay $7 per hour
rather than $6 per hour.
iii. value of the marginal product of the 10th worker is $6 per hour.
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
59) The above figure shows the initial demand for labor curve at the local Pizza Hut. The wage
rate is $6 an hour. If the demand for pizzas increases so that the price of a pizza rises,
A) at the wage rate of $6 per hour, Pizza Hut hires fewer than 10 workers.
B) Pizza Hut’s demand for labor curve shifts rightward.
C) the supply of labor curve shifts rightward.
D) Pizza Hut’s demand for labor curve shifts leftward.
E) the supply of labor curve shifts leftward.
60) If the price of movie tickets increases, there is
A) an increase in the demand for actors and actresses.
B) a decrease in the demand for actors and actresses.
C) no change in the demand for actors and actresses.
D) a decrease in the supply of actors and actresses.
E) an increase in the supply of actors and actresses.
61) Robotic technology is a substitute for labor in many manufacturing processes. If the price of
robotic technology decreases and the scale of the firm’s production does not change, there is
A) a decrease in the demand for labor.
B) an increase in the demand for labor.
C) no change in the demand for labor.
D) an increase in the supply of labor.
E) a decrease in the supply of labor.
62) If the price of capital falls, in the long run under what circumstance could the demand for
labor increase?
A) The demand for labor can never increase when the price of capital falls.
B) The demand for labor will always increase when the price of capital falls.
C) It increases if the scale of production increases enough.
D) It increases if the demand for labor is inelastic.
E) None of the above answers is correct.
63) If the price of capital rises, in the long run the demand for labor
A) definitely increases.
B) definitely decreases.
C) definitely is unaffected.
D) could increase or decrease, depending on the change in the scale of production.
E) changes only if the supply of labor changes.
64) Which of the following is a correct statement of the relationship between advances in
technology and the demand for labor?
A) The demand decreases for some types of labor and increases for other types of labor.
B) The demand for labor always decreases when technology advances.
C) The demand for labor always increases when technology advances.
D) Technology advances when the demand for labor advances.
E) None of the above answers is correct.
65) The four factors of production that produce goods and services are
A) labor, capital, profits, and entrepreneurship.
B) money, labor, rent, and profit.
C) labor, capital, land, and entrepreneurship.
D) wages, interest, rent, and profit.
E) wages, prices, quantities, and employment.
66) The wage paid to labor is
A) a factor output.
B) a factor price.
C) a factor input.
D) an input of the workforce.
E) part of the firm’s normal profit.
67) The demand for labor is derived from the
A) supply of labor.
B) wage rate.
C) supply of the good the labor is used to produce.
D) demand for the goods and services the labor helps produce.
E) supply of all the other factors of production that can be substituted for labor.
68) Which of the following is true?
A) The value to a firm of hiring another worker is the worker’s value of the marginal product.
B) A firm will hire more workers if the wage rate is greater than the value of the marginal
product.
C) The value of the marginal product is the cost of hiring a worker.
D) The value of the marginal product increases as more workers are hired.
E) The value of the marginal product equals the price of the good produced divided by the
marginal product.
69) The value of the marginal product of labor is equal to the marginal product of labor
________ the price of a unit of output.
A) divided by
B) multiplied by
C) minus
D) plus
E) squared and then multiplied by
70) The rule for maximizing profit is to hire labor up to the point at which the value of the
marginal product
A) equals the wage rate.
B) is greater than the wage rate.
C) is less than the wage rate.
D) is a mirror image of the wage rate.
E) equals the price of the product produced.
71) An increase in the price of the firm’s output leads to a
A) movement up along the demand for labor curve.
B) movement down along the demand for labor curve.
C) rightward shift of the demand for labor curve.
D) leftward shift of the demand for labor curve.
E) rightward shift of the supply of labor curve.
18.2 Labor Markets
1) As the wage rate rises, the quantity of labor an individual supplies
A) decreases at all wage rates.
B) initially decreases at low wage rates and then increases at high wage rates.
C) increases at all wage rates.
D) initially increases at low wage rates and then decreases at high wage rates.
E) does not change.
2) The supply of labor curve for an individual is
A) upward sloping at all wage rates.
B) downward sloping at all wage rates.
C) upward sloping for lower wage rates and begins to slope downward at higher wage rates.
D) downward sloping for lower wage rates and begins to slope upward at higher wage rates.
E) an upside-down U-shape.
3) Because leisure time has value to many workers, as wages increase the labor supply curve
A) has a positive slope.
B) bends backwards and has a negative slope.
C) becomes a horizontal line.
D) becomes a vertical line.
E) bends forward and has a positive slope.
4) Which of the following statements about the supply of labor is correct?
A) It is perfectly inelastic at whatever quantity individuals are willing to work.
B) An individual’s supply of labor curve is always upward sloping, like the supply curves of
other items.
C) It is perfectly price elastic at the current wage rate.
D) An individual’s supply of labor curve can bend backwards.
E) The supply of labor curve is shaped like an upside-down U.
5) When more people remain in school for full-time education and training, the supply of low-
skilled labor ________ and the supply of high-skilled labor ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) does not change; does not change
6) What is the effect on the supply of low-skilled labor of an increase in the number of people
pursuing higher education?
A) It becomes more inelastic.
B) The supply of low-skilled labor decreases.
C) The supply of low-skilled labor increases.
D) It becomes more elastic.
E) None of the above answers is correct.
7) According to a recent prediction in The Wall Street Journal the adult population of Russia will
decline dramatically over the next few decades. If this prediction is correct, the supply of labor in
Russia will
A) increase.
B) not change.
C) decrease.
D) become less elastic.
E) become more elastic.
8) If the wage rate increases, then
A) the quantity of labor supplied definitely decreases.
B) there is a movement upward along the supply of labor curve.
C) the supply of labor curve shifts rightward.
D) the supply of labor curve shifts left ward.
E) the quantity of labor supplied definitely increases.
9) A change in the wage rate
A) shifts the supply of labor curve so that the supply becomes more elastic.
B) shifts the supply of labor curve leftward.
C) shifts the supply of labor curve rightward.
D) does not shift the supply of labor curve but instead leads to a movement along it.
E) either shifts the supply of labor curve leftward or rightward depending whether the demand
for labor curve shifts rightward or leftward.
10) Which of the following shift the supply of labor curve leftward?
i. an advancement in technology
ii. a decrease in the price of the product that the labor produces
iii. a decrease in the adult population
A) i and ii
B) ii and iii
C) ii only
D) iii only
E) i, ii, and iii
11) The figure above shows the market supply of labor curve. Which of the following might be
the reason the labor supply curve shifted from S0 to S1?
A) an increase in technology
B) a decrease in technology
C) an increase in the number of women in the work force
D) a decrease in the adult population
E) an increase in the wage rate
12) The figure above shows the market supply of labor curve. Which of the following might be
the reason the labor supply curve shifted from S0 to S1?
A) an increase in technology
B) a decrease in technology
C) a decrease in the number of women in the work force
D) an increase in the adult population
E) an increase in the wage rate.
13) Suppose in Chicago, at the going wage rate of $8.00 an hour, the quantity of lifeguards
demanded exceeds the quantity supplied by 13,000 lifeguards. As a result,
A) there is a surplus of lifeguards in Chicago.
B) there is a shortage of lifeguards in Chicago.
C) the lifeguard labor market is in equilibrium in Chicago.
D) wage rates will probably fall in this market.
E) the demand for labor of lifeguards in Chicago will decrease.
14) A surplus of workers occurs
A) when the wage rate exceeds the equilibrium wage rate.
B) when the wage rate is less than the equilibrium wage rate.
C) at the equilibrium wage rate.
D) whenever there is a shortage of goods.
E) whenever there is a surplus of goods.
15) Suppose in Philadelphia the quantity of economists demanded is less than the quantity
supplied by 2,000 economists. As a result,
A) there is a shortage of economists in Philadelphia.
B) salaries for economists fall.
C) there is equilibrium in this market.
D) the labor supply curve for economists in Philadelphia is vertical.
E) the labor demand curve for economists in Philadelphia shifts rightward.
16) If the supply of labor increases, then the equilibrium wage rate ________ and the equilibrium
quantity of labor ________.
A) rises; increases
B) might rise, fall, or not change; increases
C) rises; might increase, decrease, or not change
D) falls; increases
E) falls; does not change
17) If the demand for labor decreases, then the equilibrium wage rate ________ and the
equilibrium quantity of labor ________.
A) falls; increases
B) might rise, fall, or not change; increases
C) rises; might increase, decrease, or not change
D) falls; decreases
E) falls; does not change
18) If both the demand for labor and the supply of labor increase, then the equilibrium wage rate
________ and the equilibrium quantity of labor ________.
A) rises; increases
B) might rise, fall, or not change; increases
C) rises; might increase, decrease, or not change
D) falls; increases
E) falls; decreases
19) If a union is able to organize workers in a competitive labor market but the union cannot
affect the demand for its members’ labor, then the wage rate ________ and the quantity of labor
hired ________.
A) rises; increases
B) rises; decreases
C) rises; does not change
D) does not change; increases
E) falls; decreases
20) If a union restricts the supply of labor, it ________ the wage rate and ________ the level of
employment.
A) raises; decreases
B) raises; increases
C) raises; does not change
D) lowers; decreases
E) lowers; increases
21) Unions ________ free trade and ________ a higher minimum wage.
A) favor; favor
B) are neutral toward; oppose
C) favor; oppose
D) oppose; favor
E) oppose; oppose
22) Which of the following is a method used by unions to increase the demand for their
members’ labor?
A) Support import restrictions.
B) Decrease the marginal product of union members.
C) Increase imported goods and services
D) Oppose immigration restrictions.
E) Oppose minimum wage laws.
23) Which of the following methods is used by unions to increase the demand for the labor of its
members?
A) Decrease the marginal product of union members
B) Support minimum wage laws
C) Support free trade
D) Support laws that increase immigration into the country
E) Decrease demand for the good produced
24) A rise in the minimum wage increases the demand for union labor because this policy change
A) lowers the wage rate paid to union labor.
B) raises the productivity of union labor.
C) lowers the cost of a substitute for union labor.
D) lowers the productivity of union labor.
E) raises the cost of a substitute for union labor.
25) Unions support immigration restrictions because the restrictions create
A) an increase in the supply of union labor.
B) a decrease in the supply of union labor.
C) unemployment.
D) an increase in the demand for union labor.
E) a decrease in the demand for union labor.
26) Which of the following decreases the supply of labor that competes with union labor?
A) an increase in the minimum wage
B) an increase in the demand for imported goods
C) an increase in union members’ productivity
D) new laws that restrict immigration
E) All of the above would cause a decrease in the supply of labor.
27) Which of the following is NOT a method used by union to increase their members’ wages?
A) Limit the supply of non-union workers.
B) Increase the demand for union workers.
C) Support minimum wage increases.
D) Increase union members’ productivity.
E) None of the above because they are all methods unions use to increase their members’ wages.
28) Which of the following is NOT a method by which unions try to increase the demand for the
labor of their members?
A) increasing the marginal product of union members
B) increasing the supply of the goods produced by union labor
C) supporting minimum wage laws
D) supporting import restrictions
E) supporting immigration restrictions
29) An individual’s labor supply curve eventually bends backward because at a high enough
wage rate,
A) people are willing to work more hours.
B) employers are willing to hire more workers.
C) people desire more leisure time.
D) very few workers are hired.
E) more people enter the labor market to search for jobs.
30) How does an increase in the adult population affect the labor market?
A) The demand for labor will become more inelastic.
B) The supply of labor will decrease.
C) The supply of labor will increase.
D) The demand for labor will decrease.
E) The demand for labor will increase.
31) The supply of labor curve shifts leftward if
A) the population increases.
B) the demand for labor curve shifts leftward.
C) the supply of labor increases.
D) the wage rate falls.
E) the supply of labor decreases.
32) If the wage rate is above the equilibrium wage rate, the quantity of labor demanded is
________ the quantity of labor supplied.
A) greater than
B) less than
C) equal to
D) the negative of
E) not comparable to
33) The more people who remain in school for full-time education and training, the ________ is
the ________ low-skilled labor.
A) smaller; demand for
B) smaller; supply of
C) larger; supply of
D) larger; demand for
E) less elastic; demand for
34) If the supply of labor decreases, then the equilibrium wage rate ________ and equilibrium
employment ________.
A) does not change; decreases
B) rises; increases
C) rises; decreases
D) falls; increases
E) falls; decreases
35) Of the following, a union is LEAST likely to support
A) an increase in the minimum wage rate.
B) laws that restrict immigration into the country.
C) on-the-job training that makes their members’ more productive.
D) laws that increase the quantity of the nation’s imports.
E) programs that boost the demand for the goods and services their members produce.
1) Other things remaining the same, the
A) higher the rental rate of capital, the greater the quantity of capital demanded.
B) lower the rental rate of capital, the smaller the quantity of capital demanded.
C) higher the rental rate of capital, the smaller the quantity of capital demanded.
D) rental rate of capital and the quantity of capital demanded are not related.
E) higher the rental rate of capital, the more the demand for capital decreases.
2) When the rental rate for capital falls, the ________ capital ________.
A) demand for; increases
B) demand for; decreases
C) quantity demanded of; increases
D) quantity demanded of; decreases
E) supply of; increases
3) An increase in the rental rate of capital ________ the quantity of capital demanded and
________ the quantity of capital supplied.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) does not change; does not change
4) A technological change that raises the marginal revenue product of capital ________ the
rental rate for capital because the ________.
A) raises; supply curve of capital shifts leftward
B) lowers; supply curve of capital shifts rightward
C) raises; demand curve for capital shifts leftward
D) raises; demand curve for capital shifts rightward
E) lowers; demand curve for capital shifts leftward