MOCK EXAM
"LABOR MARKET IN IMPERFECTLY COMPETITIVE INPUT MARKET"




1. According to some supporters of the minimum wage, it has very small or even nonexistent negative employment effects because:
A.the demand for minimum wage labor is highly elastic.
B.it reduces turnover among minimum wage workers, prompts employers to use them more efficiently, and thus raises their average productivity.
C.it encourages teenagers to stay in school.
D.employers substitute lower fringe benefits for higher pay, keeping their compensation costs the same.


2.
R-1 F28021

Refer to the above diagrams. The firm's total revenue:
A.is 0abc.
B.is 0wbc.
C.is wab.
D.cannot be determined.



3. Many economists are critical of the minimum wage because they believe that it:
A.hurts the efforts of labor unions.
B.reduces the number of available job opportunities.
C.conflicts with policies designed to equalize the distribution of income.
D.causes labor shortages in affected markets.


4. If the nominal wage increases by less than the price level, the real wage:
A.will increase.
B.will decrease.
C.may either increase or decrease.
D.will diverge from labor productivity growth.


5. In a monopsonistic labor market the employer will maximize profits by employing workers up to that point at which:
A.the difference between the wage rate and marginal resource (labor) cost is at a maximum.
B.marginal revenue product equals marginal resource (labor) cost.
C.the wage rate equals marginal revenue product.
D.the wage rate equals marginal resource (labor) cost.


6.
Use the resource demand data shown on the left and the resource supply data on the right in answering the following question(s):

R-2 REF28035

Refer to the above data. What will be the equilibrium wage rate?
A.$6
B.$5
C.$4
D.$3



7.

R-3 F28103

Refer to the above labor market diagram where D is the labor demand curve, S is the labor supply curve, and MRC is the marginal resource (labor) cost curve. If an inclusive union was formed and was able to get the monopsonist to agree to a $7 wage rate, then the monopsonist would:
A.reduce employment from 5 to 3 workers.
B.reduce employment from 5 to 2 workers.
C.increase employment from 3 to 5 workers.
D.not alter its level of employment.



8. Compensating differences in wages pay workers for:
A.differences in worker training and skills.
B.differences in the nonmonetary characteristics of jobs.
C.geographic immobilities.
D.discrimination in hiring and firing.


9. If a firm is hiring variable resources D and F in imperfectly competitive input markets, it will maximize profits by employing D and F in such quantifies that:
A.MRPD / MRCD = MRPF / MRCF = 1.
B.MRPD / MRCD = MRPF / MRCF .
C.MRPD / PD = MRPF / PF = 1.
D.MRPD / PD = MRPF / PF .


10. Industrial unions are more likely to increase wage rates by restricting the supply of labor than are craft unions.
A.True
B.False


11. A union may increase the demand for the services of its constituents by all of the tactics below except:
A.successfully increasing labor productivity.
B.lobbying for increases in public expenditures on the product it is producing.
C.successfully advertising the product it is producing to private consumers.
D.increasing the price of products that are complements for the one it is producing.


12. Which of the following unions best represents the exclusive unionism model?
A.the mine workers
B.the teamsters
C.the carpenters
D.the steelworkers


13. Critics of minimum-wage legislation argue that it:
A.keeps inefficient producers in business.
B.reduces employment.
C.undermines incentives to work.
D.is deflationary.


14. According to international comparisons, which nation had the highest real wages in U.S. dollar terms in 1999?
A.the United States
B.Germany
C.Italy
D.Canada


15. If all workers are homogeneous, all jobs are equally attractive to workers, and labor markets are perfectly competitive:
A.compensating differences would cause wage differentials.
B.noncompeting groups of workers would result in wage differentials.
C.all workers would receive the same wage rate.
D.worker mobility would occur such that wage differentials would widen.


16.

R-4 REF28027

Refer to the above data. If this firm can hire as few or many workers as it wants at $8, it is:
A.hiring labor in a monopsony labor market.
B.hiring labor in a purely competitive labor market.
C.selling its product in a monopolized product market.
D.selling its product in a purely competitive product market.



17.

R-4 REF28027

Refer to the above data. This firm's product price is:
A.$2.
B.$3.
C.$4.
D.$16.



18. Wage differentials can arise from:
A.both the demand-side and supply-side of labor markets.
B.the demand-side of labor markets only.
C.the supply-side of labor markets only.
D.neither the demand-side or supply-side of labor markets.


19. A monopsonistic employer:
A.has a perfectly elastic labor supply curve.
B.is necessarily a monopolist in the product market.
C.confronts a marginal resource (labor) cost that is greater than the wage rate.
D.confronts a marginal resource (labor) cost that is less than the wage rate.


20. The principal-agent problem arises in labor markets because:
A.a firm may realize excessively large profits.
B.workers may provide less-than-expected work effort.
C.compensating wage differences do not pay for differences in the nonmonetary aspects of jobs.
D.human capital investments vary among workers.



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