The Labour Market

Question 1

What type of demand is labour?

Answer 1

Derived demand

Question 2

What does the marginal productivity theory say?

Answer 2

The demand for any factor of production depends on its marginal revenue product

Question 3

What is marginal revenue product?

Answer 3

The extra revenue gained by the firm from employing one more worker

Question 4

What is the formula for marginal revenue product?

Answer 4

MRP = MPP X MR

Question 5

What is the marginal physical product of labour (MPP)?

Answer 5

The output produced by each additional worker

Question 6

What is the marginal cost of labour?

Answer 6

The cost of hiring one additional worker

Question 7

When does a firm have an optimal number of workers?

Answer 7

When MRP of labour is equal to MC of labour

Question 8

When is a firm employing too few workers?

Answer 8

When MRP of labour is greater than MC of labour

Question 9

When is a firm employing too many workers?

Answer 9

When MRP of labour is less than MC of labour

Question 10

What is a firm’s demand for labour generally affected by?

Answer 10

Productivity

Question 11

What do high unit costs suggest?

Answer 11

There is low productivity

Question 12

What is an individual’s labour supply?

Answer 12

The total number of hours which that person is willing to work at a given wage rate

Question 13

What is the labour supply for an occupation?

Answer 13

The number of workers willing to work in that occupation at a given wage rate

Question 14

What is supply of labour in the long run determined by?

Answer 14

Monetary and non-monetary factors

Question 15

What is a monetary benefit?

Answer 15

The welfare a worker gains from the wage they receive

Question 16

What is a non-monetary benefit?

Answer 16

Advantages or rewards that employees or individuals receive that are not in the form of direct financial compensation

Question 17

What factors can affect supply of labour?

Answer 17

Wage rate
Non-monetary benefits
Population size
Education / Training
Working conditions
Social factors

Question 18

What type of job is supply of labour elastic for?

Answer 18

Low skill jobs
Part-time / Temporary jobs

Question 19

What type of job is supply of labour inelastic for?

Answer 19

High skill jobs
Significant barriers to entry jobs
Small niche jobs

Question 20

What are wage differentials?

Answer 20

Skills / Qualifications
Industry and sector
Geographical location
Discrimination

Question 21

What are the the reasons for wage differentials?

Answer 21

Low supply of qualified labour
Low willingness to do job
Productivity is rewarded
Cost of living

Question 22

What is a trade union?

Answer 22

An organization of workers formed to protect and promote their interests

Question 23

What are the aims of a trade unions?

Answer 23

Higher wages for members
Improved working conditions
Job security
Training and development

Question 24

What are productivity bargains?

Answer 24

Agreements between trade unions and employers to link pay increases to productivity improvements

Question 25

What is a downside of trade unions?

Answer 25

Higher labour cost May cause industrial action (strikes) Restrict flexibility in hiring

Question 26

What is wage discrimination?

Answer 26

When workers with the same productivity are paid differently based on characteristics unrelated to their job

Question 27

What is labour market discrimination?

Answer 27

When certain groups face unequal treatment in hiring, wages, or promotions based on factors unrelated to productivity

Question 28

What are the advantages of wage discrimination?

Answer 28

Lower costs for employers Increased employment Cost advantages

Question 29

What are the disadvantages of wage discrimination?

Answer 29

Reduces morale Inefficiency Inequality Legal consequences Market failure

Question 30

What happen to employers as a result of discrimination?

Answer 30

Reduced productivity Higher turnover Legal and reputational risk Inefficiency Lost market opportunities

Question 31

What happen to the government as a result of discrimination?

Answer 31

Increased welfare cost Economic inefficiency Social unrest Lower tax revenues

Question 32

What is the national minimum wage?

Answer 32

The legal minimum hourly wage employers must pay workers

Question 33

What are the advantages of a national minimum wage?

Answer 33

Reduces poverty Decreases income inequality Increases work incentives Boosts productivity Stimulates demand

Question 34

What are the disadvantages of a national minimum wage?

Answer 34

Increased unemployment Higher business costs Inflationary pressure Regional differences Reduced competitiveness