Sample Quiz

 

Multiple Choice

 

1.      The marginal product of labor is the

 

a.       additional output a firm gets by hiring one more unit of labor.

 

b.      dollar value of the additional output a firm gets by hiring one more unit of labor.

c.       increase in the wage bill from hiring an additional worker.

d.      total output produced as a result of hiring labor.

e.       productivity of the least productive worker.

 

Use the table below to answer question 2

 

Number of workers                 units of output

                       

0                                                0

                        1                                              100

                        2                                              180

                        3                                              240

                        4                                              280

                        5                                              300

                        6                                              310

                        7                                              315

            ___________________________________

 

2.      What is the marginal product of the 6th worker?

 

a.       5

b.      10

c.       300

d.      310

e.       315

 

3.      When a market has only a single buyer, it is a(n)

 

a.       monopoly

b.      monopolistic competitor

c.       customer

d.      monopsony

e.       monopsonistic competitor

 

4.      In a market with a single buyer of labor, the firm should hire another worker as long as which of the following is true?

 

a.       MP > VMP

b.      VMP > wage

c.       VMP > MP

d.      VMP > marginal labor cost

e.       MP > marginal labor cost

 

 

5.      Which of the following is part of human capital?

 

a.       education

b.      training

c.       initiative

d.      intelligence

e.       all of the above

 

6.      Union membership rates today are

 

a.       about 16-17%.

b.      about the same as union membership rate in the 1950s.

c.       an important explanation for income differentials.

d.      increasing sharply.

e.       none of the above

 

7.      compared to wages in nonunionized markets, wages in unionized markets are

 

a.       higher.

b.      lower.

c.       equivalent.

d.      increasing.

e.       decreasing.

 

8.      If a job pays a higher wage because it requires the worker to work in unpleasant working conditions, the worker is receiving

 

a.       workers compensation.

b.      a wage premium.

c.       a fringe benefit.

d.      a compensating wage differential.

e.       what they deserve.

 

9.  Which of the following is an example of discrimination?

 

a.       An employer arbitrarily preferring one group of workers.

b.      A consumer paying more for a product produced by a member of a favored group.

c.       Hiring only white workers, regardless of marginal productivity.

d.      Providing less education to female children

e.       all of the above

 

9.      In "winner-take-all" markets,

 

a.       there is only one available worker.

b.      small differences in human capital translate into large pay differences.

c.       high wages are given to the worker with the highest marginal productivity.

d.      the most competitive firm hires all qualified workers.

e.       wages are lower than in other markets.

 

 

Problems/Short Answer

 

1. Assume you finish your undergraduate degree and are considering either going to work or going to graduate school to earn a 2-year Master's degree.  If you take a job, the present value of your expected lifetime earnings will be $600,000.  If you go to graduate school, the present value of your expected lifetime earnings will increase to $627,500, but you will have to make a tuition payment of $15,000 at the beginning of each year.  Apart from the salary, you are indifferent between the two options. If the interest rate is 10%, should you go to graduate school?

 

2. Suppose you own and manage a t-shirt stand and you hire workers in a competitive labor market.  The nonlabor cost of each t-shirt is $5.00.  Your sales vary with the number of workers hired, as shown in the table below.

 

Number of Workers                       T-shirts per day

 

        0                                              0

            1                                              8                                 

            2                                              14       

            3                                              20

            4                                              24

            5                                              26

            6                                              27

      7                                              27

     ________________________________________

 

a.  If t-shirts sell for $15.00 each, and the competitive market wage is $30 per day, how many workers should you hire?

b.  Suppose a t-shirt workers union is established and the minimum acceptable wage becomes $40 per day, how many workers will you hire?

c.  If the market wage remains at $30 and the price of t-shirts increases to $20.00 each,  how many workers will you hire?