Practice_Ch13_ - Chapter 13 Practice Test Wage...

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Chapter 13 Practice Test Wage Determination 1. Use the following data to answer the next question. Quantity of Labor Total Product Total Revenue 1 5 $15 2 9 27 3 12 36 4 14 42 5 15 45 Refer to the table. Based on the information given, this firm is a: a. pure competitor b. pure monopolist c. discriminating monopolist d. oligopolist Answer: a Feedback: Total revenue is a constant multiple of total product, suggesting that price must be constant as output increases. Such “price-taking” is a characteristic of pure competition. 2. Many economists do not support an increase in the minimum wage, arguing that such an increase would likely: a. reduce the demand for skilled labor b. create a labor shortage c. increase the size of the government’s deficit d. increase unemployment of low-wage workers Answer: d Feedback: An increase in the minimum wage will push many employers up their labor demand curves, causing them to reduce employment. Others may even go out of business entirely. 3. Differences in education lead to wage differentials arising from: a. the demand side of labor markets only b. the supply side of labor markets only c. both the demand side and supply side of labor markets d. neither the demand side nor the supply side of labor markets Answer: c Feedback: Because education is costly to obtain, workers must be compensated to obtain it—a supply side determinant. Educated workers are also likely to be more productive, which increases the demand for them relative to less-educated workers. 4. Which of the following would most likely attempt to raise wages by restricting the supply of labor? a. The United Mine Workers b. The American Federation of State, County, and Municipal Workers c. The International Brotherhood of Electrical Workers d. The Teamsters Answer: c Feedback: This tactic is used by exclusive, or craft, unions such as the electrical workers. The other groups are representative of the inclusive union model.
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5. In which of the following situation is the resulting change in employment ambiguous? a. An inclusive union successfully negotiates an increase in the wage rate with several employers in the same industry b. An exclusive union successfully restricts the supply of labor c. An inclusive union is formed to bargain with a monopsonistic employer d. An inclusive union successfully lobbies the government to decrease the price of a complementary input Answer: c Feedback: Compared to a firm in a competitive labor market, a monopsonistic firm hires fewer workers at a lower wage. An inclusive union may increase employment at such a firm by reducing the marginal wage cost (even though the average wage cost is higher.) However, if the wage increase is very large, employment may decrease instead. 6. A firm may choose to pay its employees an annual bonus based on team output in order to:
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Practice_Ch13_ - Chapter 13 Practice Test Wage...

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