QUESTIONS FOR SECTION VUI

1. Which of the following will tend to raise the wage rale in the domestic cotton clothing industry? (a) a fall in the price of wool (b) the lifting of import restrictions on wool (c) the lifting of import restrictions on cotton (d) a rise in the price of wool (e) an excess supply of wool.

2. Under which of the following circumstances will a successfiil union wage claim definitely increase the total income distributed among its members?

(a) when the supply of labor inelastic (b) when the demand for labor is elastic (c) when the demand for labor is inelastic (d) when the supply of labor is elastic (e) none of the above.

3. The effect of technical progress hi an industry is usually to: (a) increase the marginal physical product of labor (b) increase the demand for labor

(c) increase the price of the product (d) all of the. above except (c) (e) all of the above except (d).

4. Which of the following statements is tiue of monopsonistic buyers of labor and untrue of competitive ones? (a) the wage is the average factor cost of labor (b) the wage is less than the marginal revenue product of capital (c) unionization may decrease employment (d) the supply curve to the firm is perfecdy elastic (e) the average factor cost of labor at equilibrium is less than the marginal revenue product.

5. Which of the following would not shift the demand curve for labor? (a) a change in technology

(b) a decrease in the price of the final product (c) a change in the price of substitutes to the final product

(d) a decrease in the wage rate (e) an increase in the price of complements to the final product.

6. It will be profitable for a competitive firm to increase employment if: (a) the marginal physical product of labor is decreasing (b) the marginal physical product of labor is constant (c) the wage is less than the marginal physical product of labor (d) the wage is less than the marginal revenue product of labor (e) the wage is greater than the marginal revenue product of labor.

7. Price-taking firms in both the labor and product markets face: (a) a perfectly elastic product demand and a perfectly inelastic labor supply (b) an

inelastic product demand and an inelastic labor sup. ply (c) a perfecdy inelastic product demand and a perfectly inelastic product supply (d) a perfecdy elastic product demand and a perfecdy elastic labor supply (e) demand and supply curves of unknown elasticity.

8. The marginal factor cost curve of labor: (a) is the supply curve of labor to compedtive firms (b) decreases as the quantity of labor increases (c) wih shift up when the price of the final product rises (d) is kinked in oligopoly (e) lies below the supply curve when the firm is a monopoly.

9. Which of the following would be expected to increase both the wage rate and the amount of employment ceteris paribus? (a) restrictions on immigration (b) a decrease in the price of complements to the final product (c) a repeal of the muiimum wage law (d) a decrease in the labor force (e) refusal by a union to work for less than a certain wage in an otherwise competitive labor market.

10. In a labor monopsony facing an upward sloping supply curve: (a) the endre average factor cost curve of labor exceeds the entire marginal factor cost curve (b) the marginal factor cost curve of labor lies entirely above the average factor cost curve (c) the equilibrium marginal revenue product of labor is negative (d) the supply of labor is perfectly elastic (e) die supply of labor is perfecdy inelastic.

11. Average factor cost will always equal marginal factor cost if: (a) product demand is elastic (b) prod-uct demand is inelastic (c) the labor supply is some- what elastic (d) the labor supply is perfecdy elasdc; (e) the labor supply is perfectly inelastic.

12. Which of die following is least likely toj strengthen a unions bargaining ability? (a) a lack of close substitutes for the good or service produced, (b) low labor costs compared to total costs (c) few] possibilities for substitution of other factors of produc- j tion for labor (d) many substitutes for the good or j serviced produced (e) none of the above.

13. A chair factory produces in long run equi-l librium; the last worker hired and the last machine j rented results in an output increase of 3 and 6l more chairs per hour respectively. If the machinei can be rented at $10.00 per hour, the wage rate mustl

therefore be: (a) $5.00 (b) $10-00 (c) $30.00 (d) $60.00 (e) $2.50.

14. Reanswer above if the rental price of machines is $20.00: (a) (b) (c) (d) (e)

15. Since the early I950s the minimum wage has been increased several dmes, each followed by a per-cepdble increase in teenage and black unemployment. This suggests that the black and teenage labor markets: (a) are monopsonisdc (b) are compeddve (c) have had litde technical progress (d) are separate markets (e) require greater unionizadon.

16. The supply of labor in a certain industry is perfectly inelastic, while demand for labor is not If a cultural change causes people to work faster and produce more output per unit of dme, we would expect (a) output to decrease (b) firm profits to decrease (c) marginal cost of output to increase (d) the wage rate to increase (e) average cost of output to increase.

17. Workers join a union and use collecdve bargaining techniques in an otherwise monopsonisdc labor market If the union achieves a wage rate equal to the perfecdy compeddve rate, then which of the following will occur? (a) exploitation of labor (b) an efficiency loss (c) an increase ui employment (d) the endre marginal factor cost curve will become perfectly elasdc (e) the marginal revenue product of labor will become flat over a range.

18. Which of the following favors union power? (a) highly elasdc supply of capital (b) large expenditure on labor compared to the firms total costs

(c) difficult subsdtudon between labor and other factors of producdon (d) highly elasdc demand for the firms output (e) all of the above.

19. If the marginal physical product of capital is double the marginal physical product of labor, and the price of labor is half that of capital then: (a) the firm should hire foiu dmes as much capital as labor (b) the firm should hire twice as much capital as labor (c) the firm should hire equal amounts of capital and labor

(d) the firm is not being efficient (e) none of the above.

20. Which of the following is inconsistent with labor monopsony? (a) the firm hires labor up to the point where the marginal factor cost equals the mar-

ginal revenue product (b) the firm pays wages equal to the marginal revenue product of labor (c) the worker is being exploited (d) an efficiency loss (e) unionization could po.ssibly achieve greater efficiency in producdon.

21. If the marginal physical product of labor is ten units per man hour, and that of capital is twenty-five per machine hour, the wage rate is $3.50, and the firm is using its factors efficiendy, then the houriy rental price of capital is: (a) $1.40 (b) $3.50 (c) $7.00 (d) $8.75 (e) $10.50.

22. The MFC curve of labor for a price-taking purchaser of labor is: (a) undefined (b) is idendcal to the firms labor supply curve (c) is another nariie for the marginal revenue product curve (d) rises and falls as the marginal physical product of labor rises and falls (e) none of the above.

23. Which of the following are not methods for keeping union wages above the competidve level? (a) violence against labor price cutters (b) exclusion of women from union membership (c) legal requirements that only union labor be udlized (d) political lobbying for minimum wage legislation (e) union support of free trade with foreign countries.

24. If oil company exploration geologists are competitively supplied and demanded, which of the following would be expected to lower both their wages and employment compared to what they would otherwise be? (a) an increase in die number of geology students training for oil exploration (b) a decrease in the number of potential offshore oil uacts offered for sale by the federal government (c) an increase in the price of OPEC oil (d) a law banning gasohol (e) a rise in job opportunities in alternative scientific fields.

25. At harvest time the relationship between the marginal physical product of labor (in bushels) and the number of workers on a tvpical plum patch appears as follows:

Number of Workers 12 3 4

Marginal Physical Product 10 9 8 7

6 5

If the price of a bushel of plums is $3, and there are 100 such farms, the demand curve for labor would be: (a) $30,1; $27. 2; $24.3; $21, 12; $18,15 (b) $30, 100; $27, 200; $24, 300; $21, 400, etc. (c) $10,100; $9, 200, etc. (d) none of these.

26. Given the following data for a firm producing nails, determine the profit maximizing level of employment when the price of 1000 nails is $10 and die wage per day is $20.

Number of workers ] Total physical product 8 (1000s) per day:

2 3 4 .5 6 15 19 22 24 25

(a) 6 (b) 5 (c) 4 (d) 3 (e) 2.

27. In die question above the firm achieves total revenues of (a) $19 (b) 422 (c) $24 (d) $190 (e) none of the above.

28. W ich of the following statements is true of competitive labor markets and untrue of monopsonistic ones? (a) the firm hires until the marginal factor cost just equals the marginal revenue product

(b) the demand for the final product may be elasdc

(c) the firm experiences diminishing returns to labor

(d) the firm will have to pay a higher wage to attract more labor (e)none of the above.

29. Given the following marginal physical product of labor and employment data for each of 100 firms:

MPPi n

# 10 9 8 0 12 3

6 5 5 6

If the price of output is $3 per unit and the supply of labor is perfecdy inelasdc at N=800, then the compeddve wage rate is: (a)$3 (b)$5 (c)$6 (d)$8 (e) $9

30. If instead, the supply of labor is perfecdy elasdc at $15 per hour, employment will be: (a) indeterminate from the information given (b) 500 (c) 600

(d) 0 (e) none of the above.

31. Assume in the quesdon above that the price of the product falls to 50 per unit and that the supply remains perfectly elastic at $15 per hour Then cmplovnient will be: (a) 0 (b) 800 (c) 300 (d) 500

(e) 1.

32. Now assume in (29) diat the supply is perfectly inelastic at N = 500 and that the product price is 50(. The equilibrium wage rate will then be: (a) $2.50 (b) $10.00 (c) $3.00 (d) 0 (e) $1.50.

35. Igloo Ice Co. of Blizzard, Alaska, faces the following supply schedule:

Wage Rate: Workers:

$2 1

$3 2

$4 3

$5 4

The marginal factor cost of employing the second third, and fourth worker is respectively: (a) $4.00 $6.00, $8.00 (b) $2.00, $3.00, $4.00 (c) $2.00, $6.00, $12.00 (d) $6.00, $12.00, $20.00 (e) none of die above.

36. The Hades Hot Tub Company of Mercury, Arizona, faces the following short run marginal rew enue product curve of labor as well as the following supply schedule:

Marginal Revenue Product: $9 $8 $7 $6 $5 $4 Number of workers: 1 2 3 4 5 6

Wage Rates: $3 $4 $5 $6 $7 $8

To maximize profit, the firm should hire which number of workere? (a) 1 (b) 3 (c) 4 (d) 5 (e) 6.

37. The paint industry is composed of 1000 similar firms, each of which faces the following total product schedule when labor is the only variable factor:

Quandty of Labor (n): 0 1 2 3 4 5 6 Total Product (q): 0 30 50 60 65 69 72

Ifthe price of paint is $10 and the labor supply curve is infinitely elasdc at $50, then industry employment will be about: (a) 2000 (b) 6000 (c) 5000 (d) 2400 (e) 4000.

38. Unions achieving a super-competidve wage ; through collecdve bargaining methods in otherwise competitive industries must normally negotiate detailed working condition agreements because: (a) the excess supply of labor gives the employer incentives to- cut working condition amenities (b) the excess demand for labor creates incentives for the employer to cut amenities (c) management always has inceu-) tives to provide the worst possible working conditions i (d) the supply of labor is perfecdy inelastic at the collectively bargained wage (e) mjuiagement will want to attract more workers at the higher union wage.

39. Suppose the marginal physical product of capital is 5 units per machine-hour aiid the marginal physical product of labor is 4 units per man-hour

If A