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Which of the following explains why talented major league baseball players command much higher salaries than neurosurgeons?


A) because the total value of baseball games is much higher than the total value of neurosurgery
B) because it takes far more skill and training to be a major league baseball player than to be a neurosurgeon
C) because the supply of talented major league baseball players is relatively low compared to the supply of neurosurgeons. Therefore, major league baseball players exert far more market power than neurosurgeons.
D) because the supply of talented major league baseball players is low relative to its demand compared to the supply of neurosurgeons. Therefore, adding another player yields far greater marginal benefit than adding another neurosurgeon.

E) A) and B)
F) A) and C)

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At low wages, the labor supply curve for most people slopes upward because


A) the supply of labor is perfectly inelastic at low wages.
B) as wages increase the opportunity cost of leisure increases.
C) as wages increase income also increases unless hours worked decrease.
D) the demand for labor is perfectly elastic at low wages.

E) A) and C)
F) B) and C)

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Mel's House of Cars is an automobile dealership that sells both new and used cars.Two other dealerships located near Mel's pay their salespeople a straight salary-they receive no commission for each car they sell.Mel has decided to pay all of his salespeople a commission on all car sales.Which of the following is most likely to occur as a result of Mel's decision?


A) Mel will have difficulty finding salespeople. Research by labor economists has found that most employees prefer the security of a salary to the uncertainty of being paid based on how much revenue they generate for their employers.
B) Mel will experience a principal-agent problem. Some of his salespeople will tend to shirk because they will not be paid if they sell no cars, regardless of how hard they work.
C) Mel will be able to hire some of the most productive salespeople who work for the other two dealerships.
D) Mel risks violation of federal law that regulates firms' compensation policies.

E) C) and D)
F) B) and C)

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Worker discrimination occurs when


A) workers refuse to perform risky tasks.
B) workers refuse to work with persons of a different race.
C) customers refuse to buy products produced by a racially diverse workforce.
D) employers pay different employees different wages based on race.

E) None of the above
F) A) and B)

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The marginal productivity theory of income distribution was developed by


A) Edward Lazear.
B) George Akerlof.
C) William Stanley Jevons.
D) John Bates Clark.

E) A) and B)
F) None of the above

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Francis Crawford recently received a 20 percent wage increase and desires to work less.We can conclude that at his current wage, his supply of labor curve


A) has a positive slope.
B) has a negative slope.
C) is U-shaped.
D) is vertical.

E) B) and C)
F) None of the above

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The marginal product of labor is the increase in output as a result of hiring an additional worker while the marginal revenue product of labor is the increase in profit as a result of hiring an additional worker.

A) True
B) False

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Economic rent refers to the price of a factor of production which is fixed in supply.

A) True
B) False

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Suppose a competitive firm is paying a wage of $12 an hour and sells its product at $3 per unit.Assume that labor is the only input.If the last worker hired produces four units of output per hour, then to maximize profits the firm should


A) not change the number of workers it currently hires.
B) lay off some workers.
C) hire another worker.
D) There is not enough information to answer the question.

E) A) and D)
F) B) and D)

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What is the difference between "straight-time pay," "commission pay," and "piece-rate pay"?

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Straight-time pay refers to pa...

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A successful compensation scheme


A) must pay workers with comparable skills a comparable wage.
B) must induce effort from workers and ensure that both employer and employees benefit.
C) must enable workers to enjoy a certain standard of living and must enable employers to earn a normal rate of return.
D) must allow employees to participate in a firm's profits.

E) B) and D)
F) All of the above

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If the demand for labor is unchanged, population growth will increase the supply of labor and increase the equilibrium wage.

A) True
B) False

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The substitution effect of a wage increase is observed when


A) the higher wage income causes workers to take more leisure and work less.
B) leisure's higher opportunity cost causes workers to take less leisure and work more.
C) the higher wage income causes workers to take more leisure and work more.
D) leisure's higher opportunity cost causes workers to take more leisure and work less.

E) None of the above
F) B) and C)

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Figure 17-2 Figure 17-2 Figure 17-2 shows the marginal revenue product for Becca's Baubles, a producer of hand-beaded bracelets. -Refer to Figure 17-2.If Becca can sell her bracelets at $3 each, what is the marginal product of the 4th worker? A) $36 B) 12 bracelets C) 36 bracelets D) $144 Figure 17-2 shows the marginal revenue product for Becca's Baubles, a producer of hand-beaded bracelets. -Refer to Figure 17-2.If Becca can sell her bracelets at $3 each, what is the marginal product of the 4th worker?


A) $36
B) 12 bracelets
C) 36 bracelets
D) $144

E) B) and C)
F) A) and D)

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The demand curve for labor is also


A) the demand curve for the output produced with labor since the demand for labor is a derived demand.
B) the marginal product of labor curve.
C) the marginal revenue product of labor curve.
D) the supply curve for the output labor is used to produce.

E) A) and B)
F) B) and D)

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During recessions, economics majors earn about 35 percent more than the typical college graduate.

A) True
B) False

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A monopsony restricts the quantity of a factor demanded to force down the price of the factor and increase profits.

A) True
B) False

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Figure 17-1 Figure 17-1 Figure 17-1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies. -Refer to Figure 17-1.If the wage rate is $40, how many workers should Dale hire? A) 6 B) 5 C) 4 D) 3 Figure 17-1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies. -Refer to Figure 17-1.If the wage rate is $40, how many workers should Dale hire?


A) 6
B) 5
C) 4
D) 3

E) A) and D)
F) B) and C)

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Compensating differentials are associated most closely with which of the following?


A) hazardous jobs
B) comparable worth
C) economic discrimination
D) differences in education

E) B) and C)
F) All of the above

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Scenario 17-1 In academia, professors in some disciplines receive higher salaries than others. For example, professors teaching in business schools receive higher salaries than professors in the English department. Suppose at Unity College, assistant professors in the business school earn $80,000 while assistant professors in the English department earn $50,000. Now suppose the government passes comparable worth legislation that requires academic institutions to pay all faculty the same salaries. -Refer to Scenario 17-1.Following the passage of comparable worth legislation, Unity College responds by placing salaries at $65,000.Which of the following is the result of the legislation?


A) The supply of English professors increases and the supply of business professors decreases.
B) The demand for English professors decreases and the demand for business professors increases.
C) There will be a surplus in the market for English professors and a shortage in the market for business professors.
D) There will be a surplus in the market for English professors and the market for business professors will not be affected.

E) A) and B)
F) B) and C)

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