Chapter 5 The Extra Output Measured Dollars That

Assume that the labor market is perfectly competitive. Rather than the product demand schedule shown in

the table, suppose this firm sold its output competitively for a price of $2.50. In this case, how many

workers will this profit-maximizing firm choose to employ at a wage of $25.00?

27. “The extra output, measured in dollars, that accrues to society when an additional unit of labor is

employed” best describes

28. For a firm selling output in an imperfectly competitive market, its labor demand curve will

29. All else equal, the imperfectly competitive seller’s labor demand curve is

30. Compared to an otherwise identical competitive firm, a firm with monopoly power will hire

31. Which of the following best describes the output effect of a wage increase?

32. Which of the following best describes the substitution effect of a wage increase?

33. Which of the following best describes the output effect of a wage decrease?

34. Which of the following best describes the substitution effect of a wage decrease?

35. Compared to the long-run labor demand curve, the firm’s short-run curve is typically

36. The long-run labor demand curve incorporates

37. In the long run, the substitution effect of a lower wage

38. The long-run response to a drop in the wage exceeds the short-run response for all of the following

reasons except

39. “To find the market demand curve for a particular type of labor, simply sum the labor demand curves

of all employers of that type of labor.” This statement is

40. When deriving the market demand curve for a particular type of labor, one must

41. The market wage increases from $9 to $11 and the firm responds by reducing its labor force by 16%.

The wage elasticity coefficient is

42. Suppose that, as a result of a decrease in the market supply of labor, the wage rate has risen 10%.

After adjusting its employment level, a firm finds its total wage bill has decreased. This occurrence

indicates that the firm’s labor demand

5-18

43. Suppose that, as a result of an increase in the market supply of labor, the wage rate has fallen 10%.

After adjusting its employment levels, a firm finds its total wage bill has decreased. This occurrence

indicates that the firm’s labor demand

44. A union leader told its membership that a wage increase, while resulting in some layoffs, would

nonetheless increase the total incomes of its membership. The firm replied that a wage increase would

reduce the total incomes of its membership. We can conclude that

45. In comparing two otherwise identical industries X and Y, an economist finds that labor demand is

more elastic in industry X. Which of the following would support this finding?

46. In comparing two otherwise identical industries X and Y, an economist finds that labor demand is less

elastic in industry X. Which of the following would support this finding?

47. In his comparison of over 100 studies of labor demand, Hamermesh concludes the overall long-run

elasticity of labor demand in the United States to be

48. Which of the following can be predicted to increase the demand for labor?

49. Which of the following can be predicted to increase the demand for labor?

50. Assume that skilled labor and energy are substitutes in production. An increase in energy prices is

then predicted to

51. If energy and unskilled labor are gross complements, an increase in the price of energy will

52. Skilled labor will benefit from an increase in the wage rate paid to unskilled labor if

53. In the textile industry, industrial robots and assembly line workers are gross substitutes. Accordingly,

the drop in the price of robots has

Topic: Real World Applications

54. Suppose that the decline in prices of personal computers has reduced the demand for labor at a

particular firm. We may conclude that at this firm

55. The contingent work force

56. Since 1980, the number of jobs in manufacturing has

57. International trade

58. In which occupations does the Bureau of Labor Statistics project the fastest employment growth over

the next ten years?

59. An isoquant shows all combinations of

60. At the least-cost combination of capital and labor,

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61. The slope of an isoquant at any point reflects the

62. If the marginal rate of technical substitution of labor for capital is greater than the price of labor

relative to the price of capital, then the firm can produce the same level of output at lower total cost by

using

63. Refer to the following graph.

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If the two isoquants represent profit maximizing levels of output for two different wage rates, the move

from point A to point B represents the

64. Refer to the following graph.

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If the two isoquants represent profit maximizing levels of output for two different wage rates, the output

effect of a decrease in the wage rate is represented by the move from

Chapter 05 Test Bank Summary