Chapter 16

Question 1

As an individual earns additional income, the marginal utility of income tends to

Answer 1

Decrease

Question 2

For an upward-sloping labor supply curve, the quantity of labor supplied varies directly, ceteris paribus, with

Answer 2

The wage rate

Question 3

The labor supply curve starts to bend backward once the

Answer 3

income effect exceeds the substitution effect.

Question 4

The elasticity of labor supply measures the

Answer 4

responsiveness of labor supplied to changes in the wage rate.

Question 5

A firm’s demand for labor is referred to as a derived demand because

Answer 5

it is derived from the demand for the product that the labor is producing.

Question 6

Students who major in computer science are paid a lot more when they graduate than those who major in philosophy because

Answer 6

information technology is a growth industry.

Question 7

The marginal physical product of labor is equal to

Answer 7

the change in total output associated with one additional unit of labor.

Question 8

The change in total revenue associated with one additional unit of input is referred to as

Answer 8

MRP.

Question 9

The marginal revenue product establishes

Answer 9

an upper limit to the wage rate an employer is willing and able to pay.

Question 10

The law of diminishing returns states that, ceteris paribus, the

Answer 10

MPP of labor declines as more of it is employed with a given quantity of other (fixed) inputs.

Question 11

A firm should hire an additional worker as long as the wage rate is

Answer 11

less than or equal to the MRP.

Question 12

A competitive firm should continue to hire workers until the MRP is equal to

Answer 12

the market wage rate.

Question 13

Which of the following is inconsistent with a minimum wage that is set above the equilibrium wage?

Answer 13

there will be no unemployment

Question 14

For a minimum wage to have any impact on a labor market, it must be set at a level

Answer 14

higher than the equilibrium wage.

Question 15

Which of the following is true when the minimum wage is raised in a competitive market, ceteris paribus?

Answer 15

Some workers are better off and some are worse off.

Question 16

(Figure 30.2) The equilibrium wage rate is

Answer 16

$16 per hour.

Question 17

(Figure 30.2) Unemployed labor at the equilibrium wage is equal to

Answer 17

0 workers.

Question 18

(Figure 30.2) A minimum wage of $20 will result in a

Answer 18

surplus of 32 workers.

Question 19

(Figure 30.2) A minimum wage of $12 will result in

Answer 19

no shortage or surplus of workers.

Question 20

(Figure 30.2) The number of people employed in the competitive market at a wage of $20.00 per hour is

Answer 20

160.