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# ECON 202

Assumptions: These two graphs show two sectors of the labor market for a particular kind of labor. Relevant product markets are competitive. The two labor demand curves are identical. Initially the quantities of labor employed in the two sectors are L1 and L'1, and the wage rate in each sector is Wn. If a union is formed in sector 1 and the union increases the wage rate from Wn to Wu, then employment will

decrease, but we cannot determine by how much.

decrease by 0L2 in sector 1.

C. decrease by L1L2 in sector 1.

D. increase by L1L2 in sector 1.

AACSB: Knowledge Application

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-09 (Appendix) Relate who belongs to U.S. unions, the basics of collective bargaining, and the economic effects of unions.

Test Bank: I Topic: Labor Unions and Their Impacts

Type: Graph

219.

Assumptions: These two graphs show two sectors of the labor market for a particular kind of labor. Relevant product markets are competitive. The two labor demand curves are identical. Initially the quantities of labor employed in the two sectors are L1 and L'1, and the wage rate in each sector is Wn. The change in employment in sector 1 to which a Wn to Wu union wage increase gives rise will cause output in that sector to

A. decrease by A + B.

B. decrease by B + C + D.

decrease by C + D.

increase by A + B.

AACSB: Knowledge Application

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-09 (Appendix) Relate who belongs to U.S. unions, the basics of collective bargaining, and the economic effects of unions.

Test Bank: I Topic: Labor Unions and Their Impacts

Type: Graph

220.

Assumptions: These two graphs show two sectors of the labor market for a particular kind of labor. Relevant product markets are competitive. The two labor demand curves are identical. Initially the quantities of labor employed in the two sectors are L1 and L'1, and the wage rate in each sector is Wn. If all the workers who lose their jobs in the union sector because of a Wn to Wu union wage increase are reemployed in nonunion sector 2, output in that sector will

A. decrease by F + G.

B. increase by F + G.

increase by E + F.

increase by E.

AACSB: Knowledge Application

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-09 (Appendix) Relate who belongs to U.S. unions, the basics of collective bargaining, and the economic effects of unions.

Test Bank: I Topic: Labor Unions and Their Impacts

Type: Graph

221.

Assumptions: These two graphs show two sectors of the labor market for a particular kind of labor. Relevant product markets are competitive. The two labor demand curves are identical. Initially the quantities of labor employed in the two sectors are L1 and L'1, and the wage rate in each sector is Wn. This analysis suggests that a union wage advantage of Wu minus Ws causes a net efficiency

A. loss equal to E - A.

B. loss equal to C.

gain equal to C.

loss equal to B.

AACSB: Knowledge Application

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-09 (Appendix) Relate who belongs to U.S. unions, the basics of collective bargaining, and the economic effects of unions.

Test Bank: I Topic: Labor Unions and Their Impacts

Type: Graph

Empirical studies suggest that the efficiency loss associated with the misallocation of labor caused by the union wage advantage is

\$6 billion per year.

about 2 percent of domestic output.

C. less than one-half of 1 percent of domestic output.

D. about 4 percent of domestic output.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-09 (Appendix) Relate who belongs to U.S. unions, the basics of collective bargaining, and the economic effects of unions.

Test Bank: I Topic: Labor Unions and Their Impacts

Which of the following statements is correct?

There is clear evidence that unions have increased the average level of real wage rates for all workers.

When fringe benefits are taken into account, the overall compensation of union and nonunion workers is equal.

Approximately 10 percent of all work time is lost annually because of strikes.

D. There were 12 major work stoppages in the United States in 2015.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-09 (Appendix) Relate who belongs to U.S. unions, the basics of collective bargaining, and the economic effects of unions.

Test Bank: I Topic: Labor Unions and Their Impacts

Which one of the following research findings is most consistent with the hypothesis that unions increase productivity?

Other things equal, firm profits are lower where unions are present.

Union workers receive, on average, higher fringe benefits relative to wages than nonunion workers.

The average amount of work time lost annually to strikes is surprisingly small.

D. Labor turnover is less in unionized firms than in nonunionized firms.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-09 (Appendix) Relate who belongs to U.S. unions, the basics of collective bargaining, and the economic effects of unions.

Test Bank: I Topic: Labor Unions and Their Impacts

True / False Questions

Since the mid-1950s, union membership has declined as a percentage of employed wage and salary workers.

FALSE

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-09 (Appendix) Relate who belongs to U.S. unions, the basics of collective bargaining, and the economic effects of unions.

Test Bank: I Topic: Labor Unions and Their Impacts

The rate of unionization is substantially higher for protective service workers than for sales workers.

TRUE

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-09 (Appendix) Relate who belongs to U.S. unions, the basics of collective bargaining, and the economic effects of unions.

Test Bank: I Topic: Labor Unions and Their Impacts

Unions prefer agency shops to open shops.

TRUE

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-09 (Appendix) Relate who belongs to U.S. unions, the basics of collective bargaining, and the economic effects of unions.

Test Bank: I Topic: Labor Unions and Their Impacts

There is no evidence that unions are able to increase wage rates above those that the market would otherwise provide.

FALSE

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-09 (Appendix) Relate who belongs to U.S. unions, the basics of collective bargaining, and the economic effects of unions.

Test Bank: I Topic: Labor Unions and Their Impacts

Union workers have higher rates of job turnover than do nonunion workers.

FALSE

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-09 (Appendix) Relate who belongs to U.S. unions, the basics of collective bargaining, and the economic effects of unions.

Test Bank: I Topic: Labor Unions and Their Impacts

Right-to-work laws prohibit the formation of labor unions.

FALSE

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-09 (Appendix) Relate who belongs to U.S. unions, the basics of collective bargaining, and the economic effects of unions.

Test Bank: I Topic: Labor Unions and Their Impacts

The presence of an agency shop requires all workers to join the union within the first 30 days of employment.

FALSE

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-09 (Appendix) Relate who belongs to U.S. unions, the basics of collective bargaining, and the economic effects of unions.

Test Bank: I Topic: Labor Unions and Their Impacts

Seven of the 50 states account for approximately half of all union members in the United States.

TRUE

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-09 (Appendix) Relate who belongs to U.S. unions, the basics of collective bargaining, and the economic effects of unions.

Test Bank: I Topic: Labor Unions and Their Impacts

African Americans have higher unionization rates than whites.

TRUE

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-09 (Appendix) Relate who belongs to U.S. unions, the basics of collective bargaining, and the economic effects of unions.

Test Bank: I Topic: Labor Unions and Their Impacts

In 2015, approximately 5 percent of all work time lost was due to work stoppages.

FALSE

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-09 (Appendix) Relate who belongs to U.S. unions, the basics of collective bargaining, and the economic effects of unions.

Test Bank: I Topic: Labor Unions and Their Impacts

Multiple Choice Questions

The concept of "wages" includes the following items, except

direct money payments like salaries and commissions.

bonuses and royalties.

C. amounts spent by workers.

D. fringe benefits like health insurance and paid leave.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-01 Explain why labor productivity and real hourly compensation track so closely over time.

Test Bank: II Topic: Labor, Wages, and Earnings

Other things constant, which of the following is inversely related to inflation?

A. nominal wage only

B. real wage only

average price level in the economy

both nominal wage and real wage

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-01 Explain why labor productivity and real hourly compensation track so closely over time.

Test Bank: II Topic: Labor, Wages, and Earnings

If the price level rises by 4 percent in a year and nominal wages increase by 2 percent, then real wages will

decrease by 6 percent.

decrease by 4 percent.

C. decrease by 2 percent.

D. increase by 2 percent.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-01 Explain why labor productivity and real hourly compensation track so closely over time.

Test Bank: II Topic: Labor, Wages, and Earnings

Assume that your nominal wage was fixed at \$15 an hour, and the price index rose from 100 to 105. In this case, your real wage has

decreased to \$10.

increased to \$15.75.

C. decreased to \$14.29.

D. increased to \$20.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-01 Explain why labor productivity and real hourly compensation track so closely over time.

Test Bank: II Topic: Labor, Wages, and Earnings

Real wages would rise 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.

prices of goods and services and wage rates both rose.

prices of goods and services and wage rates both fell.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-01 Explain why labor productivity and real hourly compensation track so closely over time.

Test Bank: II Topic: Labor, Wages, and Earnings

Which statement is correct?

The percentage change in the nominal wage plus the percentage change in the price level equals the percentage change in the real wage.

The percentage change in the real wage minus the percentage change in the price level equals the percentage change in the nominal wage.

The percentage change in the price level minus the percentage change in the nominal wage equals the percentage change in the real wage.

D. The percentage change in the nominal wage minus the percentage change in the price level equals the percentage change in real wage.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-01 Explain why labor productivity and real hourly compensation track so closely over time.

Test Bank: II Topic: Labor, Wages, and Earnings

The consumer price index is 113 in Year 1 and 118 in Year 2. The nominal wage rate is \$8 in Year 1 and \$9 in Year 2. What is the approximate percentage change in the real wage rate from Year 1 to Year 2?

2 percent

4 percent

6 percent

D. 8 percent

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-01 Explain why labor productivity and real hourly compensation track so closely over time.

Test Bank: II Topic: Labor, Wages, and Earnings

Nominal monthly wages increase from \$1,500 to \$1,800, while the price level increases by 4 percent. The percentage change in real monthly wages is about

10 percent.

12 percent.

14 percent.

D. 16 percent.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-01 Explain why labor productivity and real hourly compensation track so closely over time.

Test Bank: II Topic: Labor, Wages, and Earnings

The nominal annual wage increases from \$20,000 to \$21,000, while the price level increases by 7 percent. In this case, the percentage change in the real annual wage is about

A. âˆ’1 percent.

B. âˆ’2 percent.

3 percent.

5 percent.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-01 Explain why labor productivity and real hourly compensation track so closely over time.

Test Bank: II Topic: Labor, Wages, and Earnings

Productivity measures (such as output per worker-hour) and wage rates adjusted for inflation in the United States are

inversely related.

unrelated.

directly, but not closely, related.

D. directly and closely related.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-01 Explain why labor productivity and real hourly compensation track so closely over time.

Test Bank: II Topic: Labor, Wages, and Earnings

Which of the following has not been a major factor contributing to the high productivity of labor in the United States?

A. high wage rates

education and training of workers

high levels of capital investment

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-01 Explain why labor productivity and real hourly compensation track so closely over time.

Test Bank: II Topic: Labor, Wages, and Earnings

Which of the following is an explanation for the high labor-productivity in the United States?

A. plentiful capital resources

high total output in industries

high price of labor

plentiful labor resources

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-01 Explain why labor productivity and real hourly compensation track so closely over time.

Test Bank: II Topic: Labor, Wages, and Earnings

Which of the following is a valid explanation for real wage growth?

the rising cost of capital accumulation

a contraction of employment in manufacturing industries

an increase in the quantity of labor

D. a rising rate of labor productivity growth

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-01 Explain why labor productivity and real hourly compensation track so closely over time.

Test Bank: II Topic: Labor, Wages, and Earnings

The basic explanation for high real wages in the United States and other industrially advanced economies is that the

A. labor supply has increased more rapidly than labor demand in these nations.

B. labor demand has increased more rapidly than labor supply in these nations.

unemployment in these nations has remained relatively stable over the years.

inflation rate in these nations has been higher than the rate of increase in nominal wages.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-01 Explain why labor productivity and real hourly compensation track so closely over time.

Test Bank: II Topic: Labor, Wages, and Earnings

In considering real-world situations, we must recognize the fact that by "wages" in this chapter, we mean the following, except the

A. total price that employers pay to obtain labor.

B. total income earned by households.

total compensation of workers.

total of direct payments and fringe benefits to workers.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-01 Explain why labor productivity and real hourly compensation track so closely over time.

Test Bank: II Topic: Labor, Wages, and Earnings

In recent years, total compensation to workers has risen faster than the take-home pay of average workers. This implies that

A. something is wrong with the statistics on either compensation or take-home pay.

B. fringe benefits have become a larger share of total worker compensation.

direct payments have become a larger share of total worker compensation.

workers' pay has been declining slightly in recent years.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-01 Explain why labor productivity and real hourly compensation track so closely over time.

Test Bank: II Topic: Labor, Wages, and Earnings

According to the Conference Board data for 2013, which of the following nations had significantly higher hourly wages for production workers compared to the U.S.?

A. Germany

United Kingdom

Japan

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-01 Explain why labor productivity and real hourly compensation track so closely over time.

Test Bank: II Topic: Labor, Wages, and Earnings

A characteristic of a purely competitive labor market would be

A. "price-maker" behavior by the workers.

B. "wage-taker" behavior by workers.

many firms selling the same product.

many workers with different skills.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-02 Show how wage rates and employment levels are determined in competitive labor markets.

Test Bank: II Topic: A Purely Competitive Labor Market

In a purely competitive labor market, a profit-maximizing firm will hire labor up to the point where the marginal revenue product of labor equals the

A. wage rate or price of labor.

price of the product.

marginal cost of one extra unit of output.

average cost of each unit of output.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-02 Show how wage rates and employment levels are determined in competitive labor markets.

Test Bank: II Topic: A Purely Competitive Labor Market

A firm finds that it must increase wages to attract extra workers. The firm will hire labor up to the point where the marginal

product of labor equals the wage rate.

revenue product of labor is greater than the wage rate.

revenue product of labor starts to decline.

D. revenue product equals the additional cost of hiring an extra worker.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-02 Show how wage rates and employment levels are determined in competitive labor markets.

Test Bank: II Topic: A Purely Competitive Labor Market

If the supply of labor in a purely competitive labor market increases, then the product

A. supply curve for a single employer will shift to the right.

supply curve for a single employer will shift to the left.

demand curve for a single employer will shift to the right.

demand curve for a single employer will shift to the left.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-02 Show how wage rates and employment levels are determined in competitive labor markets.

Test Bank: II Topic: A Purely Competitive Labor Market

A firm that hires labor and sells its product both in purely competitive markets will

have a horizontal demand curve for labor.

face a downward-sloping demand curve for its product.

C. have a downward-sloping demand curve for labor.

D. have a horizontal supply curve for its product.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-02 Show how wage rates and employment levels are determined in competitive labor markets.

Test Bank: II Topic: A Purely Competitive Labor Market

If the wage rate in a purely competitive labor market increases, it will cause the

A. marginal resource cost curve for a single competitive firm in the industry to shift down.

B. marginal resource cost curve for a single competitive firm in the industry to shift up.

labor supply curve for a single competitive firm to shift downward.

labor supply curve for the industry to shift rightward.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-02 Show how wage rates and employment levels are determined in competitive labor markets.

Test Bank: II Topic: A Purely Competitive Labor Market

258.

A firm's labor input, total output of labor, and product price schedules are given in the table. Labor is the only variable input. What is the marginal revenue product of the fifth worker?

\$6

\$7

\$8

D. \$9

AACSB: Knowledge Application

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-02 Show how wage rates and employment levels are determined in competitive labor markets.

Test Bank: II Topic: A Purely Competitive Labor Market

259.

A firm's labor input, total output of labor, and product price schedules are given in the table. Labor is the only variable input. How many workers will the profit-maximizing firm hire if the wage rate is \$8 per day?

3

4

C. 5

D. 6

AACSB: Knowledge Application

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-02 Show how wage rates and employment levels are determined in competitive labor markets.

Test Bank: II Topic: A Purely Competitive Labor Market

260.

A firm operating in a purely competitive labor market has the marginal revenue product schedule shown in the table.

Workers MRP

1 \$24

2 22

3 20

4 18

5 16

6 14

7 12

If the wage rate decreases from \$17 to \$13, by how much will the firm expand employment?

5 workers

4 workers

3 workers

D. 2 workers

AACSB: Knowledge Application

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-02 Show how wage rates and employment levels are determined in competitive labor markets.

Test Bank: II Topic: A Purely Competitive Labor Market

261.

The graph shows a firm that buys its inputs and sells its output in competitive markets. If the firm develops a new technology that increases labor productivity, the equilibrium level of employment for this firm is expected to be

L0.

zero.

lower than L0.

D. higher than L0.

AACSB: Knowledge Application

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-02 Show how wage rates and employment levels are determined in competitive labor markets.

Test Bank: II Topic: A Purely Competitive Labor Market

262.

Refer to the graph. Suppose that a competitive firm in long-run equilibrium along MRP2 faces a market wage rate of W0. If the price of the firm's product increases, other things remaining the same, the effect of this change in price would be to

A. increase the firm's demand for labor from MRP2 to MRP3.

decrease the firm's demand for labor from MRP2 to MRP1.

move along MRP2 from point A to point B.

move along MRP2 from point B to point A.

AACSB: Knowledge Application

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-02 Show how wage rates and employment levels are determined in competitive labor markets.

Test Bank: II Topic: A Purely Competitive Labor Market

A firm pays the same wage rate to all its workers. At present, 10 workers are employed at \$50 per day. Wages are subsequently raised to \$55 per day in order to attract an extra worker. Thus, the marginal labor cost per day is

A. \$5.

B. \$10.

C. \$55.

D. \$105.

AACSB: Knowledge Application Accessibility: Keyboard Navigation

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-02 Show how wage rates and employment levels are determined in competitive labor markets.

Test Bank: II Topic: A Purely Competitive Labor Market

A profit-maximizing firm operates in purely competitive product and resource markets, with the resource and production schedules shown in the table.

Workers Total Production

8 440

7 410

6 370

5 320

4 260

3 180

2 110

1 55

The product price is \$10 per unit and the cost per worker is \$540. How many workers will the firm employ?

A. 4

B. 5

6

7

AACSB: Knowledge Application

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-02 Show how wage rates and employment levels are determined in competitive labor markets.

Test Bank: II Topic: A Purely Competitive Labor Market

265.

Refer to the graph. The producer illustrated

is a monopsonist, since MR = P for every unit of output sold.

is a pure competitor in the output market, since it must charge a constant price.

hires labor as a monopsonist, since it has control over the market wage rate.

D. hires labor in a competitive market, since it must pay each worker the market wage rate.

AACSB: Knowledge Application

Blooms: Understand Difficulty: 02 Medium

Learning Objective: 17-02 Show how wage rates and employment levels are determined in competitive labor markets.

Test Bank: II Topic: A Purely Competitive Labor Market

266.