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The market wage increases from $9 to $11 and the firm responds by reducing its labor force by 16%. The wage elasticity

The market wage increases from $9 to $11 and the firm responds by reducing its labor force by 16%. The wage elasticity coefficient is:. 8.00, indicating elastic demand 0.80, indicating inelastic demand 1.25, indicating elastic demand 1.60, indicating inelastic demand .

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The market wage increases from $9 to $11 and the firm responds by reducing its labor force by 16%. The wage elasticity

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  1. The market wage increases from $9 to $11 and the firm responds by reducing its labor force by 16%. The wage elasticity coefficient is: • 8.00, indicating elastic demand • 0.80, indicating inelastic demand • 1.25, indicating elastic demand • 1.60, indicating inelastic demand

  2. Which of the following can be predicted to increase the demand for labor? • An increase in the price of a gross substitute for labor • A increase in the price of a gross complement in production • A decrease in product demand • A decrease in the number of firms

  3. As a result of an increase in the market supply of labor, suppose the wage rate falls by 10%. After adjusting their employment levels, firms in the market find that their total wage bills (=WxL) have increased. This result indicates that: • labor demand is inelastic over this range of wage rates • labor demand is elastic over this range of wage rates. • labor demand, was inelastic at the old wage, but is elastic at the new, higher wage. • labor demand, was elastic at the old wage, but is inelastic at the new, higher wage.

  4. Suppose workers in labor market X are qualified to work in an alternative labor market Y and vice-versa. If an increase in labor demand causes an increase in the wage rate to workers in market Y, this will tend to: • increase labor supply and reduce the wage rate in X. • increase labor demand and reduce the wage rate in X • reduce labor supply and increase the wage rate in X • reduce labor demand and reduce the wage in X.

  5. A monopsonist tends to hire too _____ workers because ______: • few; marginal revenue product exceeds the value of marginal product. • few; marginal wage costs exceeds the wage rate • many; marginal revenue product exceeds the value of marginal product • many; marginal wage costs exceeds the wage rate.

  6. At wage rate W1 there is an: • excess supply of labor and the wage rate will fall • excess supply of labor and the wage rate will rise • excess demand for labor and the wage rate will fall • excess demand for labor and the wage rate will rise

  7. For the supply and demand curves in the diagram, the level of employment will be highest at • wage rate W1 • a wage rate higher than W1 • wage rate W2 • a wage rate lower than W2

  8. The employer’s share of the Social Security and Medicare components of the payroll tax has increased, from 6.13% in 1980 to its current rate of 7.65%. Because employers pay no payroll tax on many fringe benefits, this change in tax rates has effectively • reduced the "price" of fringe benefits, rotating the wage-fringe isoprofit line inward • increased the "price" of fringe benefits, rotating the wage-fringe isoprofit line inward • reduced the "price" of fringe benefits, rotating the wage-fringe isoprofit line outward • increased the "price" of fringe benefits, rotating the wage-fringe isoprofit line outward

  9. The principal-agent problem arises primarily because • principals and agents work in a team, leading to free-rider problems • principals and agents have common interests • principals and agents have common interests • agents pursue some of their own objectives that may conflict with the objectives of the principals

  10. Compensation paid in proportion to the value of sales best describes • piece rates • time rates • commissions • bonuses

  11. A firm might choose to pay its employees a wage higher than that which would clear the market because: • the higher wage raises the opportunity cost of shirking • the higher wage may shift the labor demand curve to the left • the firm will have higher turnover, allowing new workers to invigorate the work place • the higher wage solves the free-rider problem

  12. Which one of the following conditions is required for allocative efficiency? • Marginal revenue product exceeds the value of marginal product by the greatest amount • Marginal revenue product equals the wage rate • Value of marginal product equals the marginal wage cost • Value of marginal product is the same in all alternative employments of labor

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