chapter 4 from book: overview of the labor market

Question 1

the labor market

Answer 1

market that allocates workers to jobs and coordinates employment decisions

Question 2

national labor market

Answer 2

buyers of labor and sellers of labor are searching throughout the entire nation for each other

Question 3

local labor market

Answer 3

buyers of labor and sellers of labor are searching tlocally for each other

Question 4

when is an internal labor market said to exist?

Answer 4

When a formal set of rules and procedures guides and constrains the employment relationship within a firm

Question 5

the labor force

Answer 5

all those over 16 years of age who are employed

all those over 16 years of age actively seeking work,

all those over 16 years of age expecting recall from a layoff

Question 6

Those in the labor force who are not employed for pay

Answer 6

the unemployed

Question 7

are people who are not employed and are neither looking for work nor waiting to be recalled from layoff by their employers counted as part of the labor force?

Answer 7

nah boy

Question 8

the total labor force

Answer 8

the employed and the unemployed

Question 9

what are the 4 major flows of the labor market?

Answer 9

1. Employed workers become unemployed by quitting voluntarily or being laid off (being involuntarily separated from the firm, either temporarily or permanently).
2. Unemployed workers obtain employment by being newly hired or being recalled to a job from which they were temporarily laid off.
3. Those in the labor force, whether employed or unemployed, can leave the labor force by retiring or otherwise deciding against taking or seeking work for pay (dropping out).
4. Those who have never worked or looked for a job expand the labor force by entering it, while those who have dropped out do so by reentering the labor force.

Question 10

labor force participation rate

Answer 10

labor force divided by population

Question 11

unemployment rate

Answer 11

The ratio of those unemployed to those in the labor force

Question 12

when is the labor market considered tight?

Answer 12

When the unemployment rate is around 5 percent

when jobs in general are plentiful and hard for employers to fill

most of those who are unemployed will find other work quickly

Question 13

when is the labor market considered loose?

Answer 13

When the unemployment rate is 5 percent or higher

workers are abundant and jobs are relatively easy for employers to fill

Question 14

which industries have experience a drop in labor?

Answer 14

goods-producing industries (largely manufacturing)

Question 15

which industries have experience a boom in labor?

Answer 15

private-sector services

Question 16

The wage rate

Answer 16

the price of labor per working hour

Question 17

The nominal wage

Answer 17

what workers get paid per hour in current dollars

Question 18

what do you want to compare with nominal wages?

Answer 18

the pay of various workers at a given time

Question 19

Real wages

Answer 19

suggest how much can be purchased with workers’ nominal wages

nominal wages divided by some measure of prices

Question 20

when are real wages useful

Answer 20

useful in comparing the purchasing power of workers’ earnings over a period of time when both nominal wages and product prices are changing

Question 21

The most widely used measure for comparing the prices consumers face over several years

Answer 21

the Consumer Price Index (CPI)

Question 22

why are the bundles used for pricing purposes in the CPI updated periodically?

Answer 22

because consumers change what they buy over the years

Question 23

the payment for a unit of time

Answer 23

wages

Question 24

wages multiplied by the number of time units (typically hours) worked

Answer 24

earnings

depend on both wages and the length of time the employee works

Question 25

total compensation

Answer 25

earnings plus employee benefits

Question 26

employee benefits

Answer 26

either payments in kind or deferred

Question 27

what type of benefits are the following employer-provided health care and health insurance Paid vacation time

Answer 27

payments in kind

Question 28

Deferred payments

Answer 28

can take the form of employer-financed retirement benefits employers set aside money now that enables their employees to receive pensions later

Question 29

income

Answer 29

the total command over resources of a person or family during some time period includes earnings, benefits, and unearned income

Question 30

unearned income

Answer 30

dividends or interest received on investments transfer payments received from the government in the form of food stamps welfare payments unemployment compensation etc

Question 31

what are the three markets firms have to opperate in order to survive?

Answer 31

labor market capital market product market

Question 32

terms of employment

Answer 32

wages compensation levels working conditions

Question 33

what are major labor outcomes related to?

Answer 33

(a) the terms of employment (b) the levels of employment these in turn determine demand and supply

Question 34

on which forces do a firm's total output and the way it combines labor and capital depend on?

Answer 34

product demand the amount of labor and capital they can acquire at given prices the choice of technologies available to them

Question 35

What would happen to the quantity of labor demanded if the wage rate were increased?

Answer 35

first, higher wages imply higher costs and, usually, higher product prices consumers buy less, sellers reduce their output in turn, they reduce their employment Second, as wages increase (assuming the price of capital does not change, at least initially), employers have incentives to cut costs by adopting a technology that relies more on capital and less on labor

Question 36

the scale effect created by higher wages

Answer 36

reducing employment due to higher wages

Question 37

substitution effect created by higher wages

Answer 37

employment would fall because of a shift toward a more capital-intensive mode of production wages increased so capital is substituted for labor in the production process

Question 38

what happens to the demand curve for labor if the demand for a firm's product increases?

Answer 38

demand curve shifts to the right

Question 39

what happens to the demand for labor if the demand for a firm's product increases? why? assuming that wages and capital costs remain constant

Answer 39

demand for labor at every wage level is increased firms wanna to increase their output, so they need more labor

Question 40

scale effect created by higher demand of a product if capital and wage remain unchanged

Answer 40

increase the demand for labor at any given wage rate Output levels would clearly rise as firms in the industry sought to maximize profits

Question 41

substitution effect created by higher demand of a product if capital and wage remain unchanged

Answer 41

does not exist

Question 42

how would the demand for labor be affected if capital prices fell to 50 percent of their prior level (change the supply of capital)

Answer 42

we must consider the scale and substitution effects when capital prices decline, the costs of producing tend to decline increases in production, and these increases tend to raise the level of desired employment at any given wage The scale effect of a fall in capital prices thus tends to increase the demand for labor at each wage level then it is the substitution effect where firms adopt more capital-intensive technologies in response to cheaper capital firms would substitute capital for labor and would use less labor to produce a greater amount of output than before

Question 43

scale effect created by a drop of capital prices considering wages remain unchanged

Answer 43

want to produce more because of reduced costs hire more people

Question 44

substitution effect created by a drop of capital prices considering wages remain unchanged

Answer 44

after the scale effect, firms will want to use more capital-intensive technologies in response to cheaper capital firms would substitute capital for labor and would use less labor to produce a greater amount of output than before

Question 45

what happens to demand curve for labor when there is a drop of capital prices considering wages remain unchanged?

Answer 45

the scale effect makes the curve shift to the right we want more labor to produce more goods due to reduced production costs then, the substitution effect makes the curve shift to the left we focus more on capital intensive technologies and they replace labor

Question 46

what happens to demand curve for labor when there is a rise of capital prices considering wages remain unchanged?

Answer 46

the scale effect makes the curve shift to the left we want to cut costs at first and the fastest way to do that is by reducing labor then, the substitution effect makes the curve shift to the right we focus less on capital intensive technologies and refocus on labor

Question 47

what are the three levels the demand for labor can be analyzed?

Answer 47

by a particular firm (firm demand curve) in an entire industry (industry demand curve) entire labor market of a certain profession (market demand curve) all of these demand curves vary in shapes because of the different strengths of the scale of substitution effects, but they all slope downwards

Question 48

how does the market supply curve of a profession react wages change in that same profession?

Answer 48

movement along the curve higher wages means more people want that job (more Qs) lower wages means less people want that job (less Qs)

Question 49

how does the market supply curve of a profession react when wages change in another profession?

Answer 49

the supply curve shifts to the left when wages of another profession rise the supply curve shifts to the right when wages of another profession decrease

Question 50

why is the supply curve for a firm horizontal?

Answer 50

it is the going wage the firm could get all the workers it needs at that going wage paying lower wages will make the firm lose all applicants or get those of lesser quality paying more will only increase costs furthermore, the choice to which firm to work for is purely based on compensation

Question 51

are individual firms wage takers or wage setters?

Answer 51

wage takers

Question 52

market clearing wage

Answer 52

The wage rate at which demand equals supply the going wage that individual employers and employees must face

Question 53

what happens to the labor market equilibrium if the supply stayed the same, the demand curve shifted to the right?

Answer 53

going wage would rise employment would rise

Question 54

what happens to the labor market equilibrium if the supply stayed the same, the demand curve shifted to the left?

Answer 54

going wage would fall employment would fall

Question 55

what happens to the labor market equilibrium if the supply curve shifted to the left and the demand curve stayed the same?

Answer 55

going wage would rise employment would fall

Question 56

what happens to the labor market equilibrium if the supply curve shifted to the left and the demand curve stayed the same?

Answer 56

going wage would fall employment would rise

Question 57

what happens to the labor market equilibrium if the supply curve shifted to the left and the demand curve shifted to the right?

Answer 57

dramatic increase in wages not enough info for the employment level

Question 58

what happens to the labor market equilibrium if the supply curve shifted to the right and the demand curve shifted to the left?

Answer 58

dramatic decrease in wages not enough info for the employment level

Question 59

non-market barriers to market adjustment

Answer 59

laws, customs, or institutions constraining the choices of individuals and firms

Question 60

market barriers to reaching adjustments at a particular labor market?

Answer 60

workers needing to learn the skill or new skills costs coming with recruiting and training

Question 61

do non-market forces usually leave the wage above or below equilibirum?

Answer 61

usually above below happens, but rarely

Question 62

main examples of non market keeping wages above equilibrium?

Answer 62

minimum wage laws unions

Question 63

what can create widespread unemployment?

Answer 63

f enough markets are experiencing above-market wages

Question 64

overpaid workers

Answer 64

their wages are higher than the market-clearing wage for their job

Question 65

benefits of getting rid of overpaid workers

Answer 65

could cut wages and still find enough qualified workers for their job openings expand output and make their product cheaper and more accessible to consumers more disappointed workers could find work

Question 66

underpaid workers

Answer 66

wage is below market-clearing levels

Question 67

benefits of paying more underpaid workers

Answer 67

output would rise and more workers would be attracted to the market an increase would benefit the people in society in both their consumer and their worker roles

Question 68

reservation wage

Answer 68

the wage below which the worker would refuse (or quit) the job in question

Question 69

The amount by which one’s wage exceeds one’s reservation wage in a particular job

Answer 69

amount of economic rent