Questions:
1. Initially, when a firm hires a fourth worker, its wage rate goes from $80 a worker to $90. The marginal revenue product of the fourth worker is $100. Then the government imposes a minimum wage of $90 a worker. If the firm now hires the fourth worker, its profits willA) will decrease by $10.
B) will decrease by $20.
C) will increase by $10.
D) will increase by $20.
2.The marginal product of a new worker is 80 units and the marginal expense of a new worker is $800. The marginal product of hiring current workers another hour is 10 units and the marginal expense of hiring current workers another hour is $12. If the firm needs extra hours of work (assuming the work could be done by either the new or current workers), it should
A) hire new workers.
B) hire current workers more hours.
C) be indifferent between hiring new workers or hiring current workers more hours.
D) not hire anyone for the added hours of work.
3.Two employers pay a wage of $10 an hour. Employer A is a monopsony while Employer B hires in a competitive labor market. Both firms sell their output in competitive markets. Which of the following will be true?
A) The marginal worker in both firms will add the same to the firm's revenue.
B) If a worker left employer A and joined employer B, the economy would be better off
C) Employer A has a higher average wage cost per worker than Employer B
D) It will cost employer A more to hire another worker
4.A monopsony's marginal worker has a marginal revenue product of $12 an hour and a wage of $8. A minimum wage of $10 will have which of these effects?
A) decrease the average hourly cost of a worker
B) decrease the marginal hourly cost of a worker
C) increase the marginal revenue product of the marginal worker
D) increase the firm's average profit per worker
5.Most colleges pay teachers different salaries in different fields. For example, they usually pay science teachers more than English teachers. Public schools pay teachers in different fields the same. As a result, in public schools, if they want to get getter science teachers, they have to raise everyone's wage. Which of the following is a consequence of paying teachers different salaries, as they do in colleges?
A) It raises the cost of hiring a higher quality of teachers.
B) It results most teachers getting similar pay.
C) It results in relatively fewer good teachers being hired in areas of high demand.
D) It reduces the cost of getting good teachers in the areas that are in high demand.
6.If Gene receives a raise in his hourly wage and decides he would like to increase his hours of work, we know that
A) his income effect is greater than his substitution effect.
B) his substitution effect is greater than his income effect.
C) his income and substitution effects are equal.
D) his income and substitution effects reinforce each other.
7.An increase in nonlabor income due to a rise in the value of stocks and bonds will cause
A) both an income and a substitution effect.
B) neither an income nor a substitution effect.
C) a pure income effect.
D) a pure substitution effect.
8.An increase in a person's hourly wage rate will
A) shift the wage constraint line inward
B) shift the wage constraint line outward
C) make the wage constraint line steeper
D) make the wage constraint line shallower
9.On the backward-bending portion of the labor supply curve,
A) the substitution effect is greater than the income effect
B) the substitution effect is less than the income effect
C) the substitution effect and income effect cancel each other out