McGraw-Hill Ryerson

Chapter 16. Wage Determination and Discrimination


1. Real wages would decline if the
A. prices of goods and services rose more rapidly than nominal-wage rates
B. prices of goods and services rose less rapidly than nominal-wage rates
C. prices of goods and services and wage rates both rose
D. prices of goods and services and wage rates both fell



2. The basic explanation for high real wages in Canada and other industrially advanced economies is that the
A. price levels in these nations have increased at a faster rate than nominal wages
B. governments in these nations have imposed effective minimum wage laws to improve the conditions of labour
C. demand for labour in these nations is quite large relative to the supply of labour
D. supply of labour in these nations is quite large relative to the demand for labour



3. A characteristic of a purely competitive labour market would be
A. firms hiring different types of labour
B. workers supplying labour under a union contract
C. wage taker behavior by the firms
D. price maker behavior by the firms



4. The supply curve for labour in a purely competitive market is upward sloping because
A. opportunity costs are rising
B. the marginal resource cost is constant
C. the wage rate paid to workers falls
D. the marginal revenue product rises



5. The individual firm which hires labour under purely competitive conditions faces a supply curve for labour which
A. is perfectly inelastic
B. is of unitary elasticity
C. is perfectly elastic
D. slopes upward from left to right



6. All of the following are characteristics of a monopsonist except:
A. there is only a single buyer of a particular kind of labour
B. the type of labour is relatively immobile
C. the wage rate it must pay workers varies directly with the number of workers it employs
D. the supply curve is the marginal resource cost curve



7. A monopsonist pays a wage rate which is
A. greater than the marginal revenue product of labour
B. equal to the marginal revenue product of labour
C. equal to the firm's marginal labour cost
D. less than the marginal revenue product of labour



8. If a firm employs resources in imperfectly competitive markets, to maximize its profits the marginal revenue product of each resource must equal
A. its marginal product
B. its marginal resource cost
C. its price
D. 1



9. Compared with a purely competitive labour market, a monopsonistic market will result in
A. higher wage rates and a higher level of employment
B. higher wage rates and a lower level of employment
C. lower wage rates and a higher level of employment
D. lower wage rates and a lower level of employment



10. The labour market for nurses in a small community that has two hospitals would be best described as
A. monopolistically competitive
B. a bilateral monopoly
C. an oligopsony
D. an oligopoly



11. Higher wage rates and a higher level of employment are the usual consequences of
A. inclusive unionism
B. exclusive unionism
C. an above-equilibrium wage rate
D. an increase in the productivity of labour



12. Which would increase the demand for a particular type of labor?
A. a decrease in the wages of that type of labour
B. an increase in the prices of those resources which are substitutes for that type of labour
C. an increase in the prices of the resources which are complements to that type of labour
D. a decrease in the demand for the products produced by that type of labour



13. Occupational licensing laws have the economic effect of
A. increasing the demand for labour
B. decreasing the supply of labour
C. strengthening the bargaining position of an industrial union
D. weakening the bargaining position of a craft union



14. Industrial unions typically attempt to increase wage rates by
A. imposing an above-equilibrium wage rate on employers
B. increasing the demand for labour
C. decreasing the supply of labour
D. forming a bilateral monopoly



15.
R-1 28a

If the firm employing labour were a monopsonist, the wage rate and the quantity of labour employed would be, respectively,

A. $14 and 300
B. $13 and 400
C. $14 and 400
D. $13 and 300



16.
R-1 28a

But if the market for this labour were purely competitive, the wage rate and the quantity of labour employed would be, respectively,

A. $14 and 300
B. $13 and 400
C. $14 and 400
D. $13 and 300



17.
R-1 28a

If the firm employing labour were a monopsonist and the workers were represented by an industrial union, the wage rate would be

A. between $13 and $14
B. between $13 and $15
C. between $14 and $15
D. below $13 or above $15



18.
Reference: 28b
Answer on the basis of the following labour market diagram, where D is the demand curve for labor, S is the supply curve for labor, and MRC is the marginal resource (labour) cost.
R-2 28b

If this were a purely competitive labour market, the number of workers hired and the wage rate in equilibrium would be

A. 4,000 and $14
B. 4,000 and $8
C. 6,000 and $10
D. 8,000 and $12



19.
Reference: 28b
Answer on the basis of the following labour market diagram, where D is the demand curve for labor, S is the supply curve for labor, and MRC is the marginal resource (labour) cost.
R-2 28b

If this were a monopsonistic labour market, the number of workers hired and the wage rate in equilibrium would be

A. 4,000 and $14
B. 4,000 and $8
C. 6,000 and $10
D. 8,000 and $12



20.
Reference: 28b
Answer on the basis of the following labour market diagram, where D is the demand curve for labor, S is the supply curve for labor, and MRC is the marginal resource (labour) cost.
R-2 28b

Suppose an inclusive union seeks to maximize the employment of workers with the monopsonist. If successful, the number of workers employed and the wage rate would be

A. 4,000 and $14
B. 6,000 and $12
C. 6,000 and $10
D. 8,000 and $12



21.
Reference: 28b
Answer on the basis of the following labour market diagram, where D is the demand curve for labor, S is the supply curve for labor, and MRC is the marginal resource (labour) cost.
R-2 28b

If the market were characterized as a bilateral monopoly, the number of workers hired and the wage rate in equilibrium would be

A. 6,000 and $10
B. 4,000 and $14
C. 4,000 and $8
D. indeterminate



22. The major reason that professional athletes receive much higher average salaries than teachers can best be explained in terms of
A. noncompeting labour groups
B. compensating differences
C. lack of job information
D. discrimination



23. The fact that unskilled construction workers typically receive higher wages than bank clerks is best explained in terms of
A. noncompeting labour groups
B. compensating differences
C. geographic immobilities
D. union restraints



24. Shirking can be considered to be a principal-agent problem because
A. work objectives of the principals (the workers) diverge from the profit objectives of the agent (the firm)
B. profit objectives of the principal (the firm) diverge from the work objectives of the agents (the workers)
C. the firm is operating in an oligopsonistic labour market
D. the firm pays efficiency wages to workers in a labour market



25. A firm pays an equilibrium wage of $10 an hour and the workers produce 10 units of output an hour. If the firm adopts an efficiency wage and it is successful, then the wage rate for these workers will
A. rise and output will fall
B. fall and output will rise
C. rise and output will rise
D. fall and output will fall




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