Economists treat all labor in an economy as a single market with one wage.
Correct Answer
False
False. There are many labor markets, one for each type of job, skill and location, although wages across these markets tend to move in similar directions.
Category: Labor Market Equilibrium
Question 2
A profit-maximizing employer will pay a worker more than the value of that worker's marginal product.
Correct Answer
False
False. The first rule of labor markets is that employers never pay a worker more than the value of that worker's marginal productivity, because doing so would lower profit.
Category: Demand for Labor
Question 3
For a firm selling in a perfectly competitive output market, the demand curve for labor is the value of the marginal product of labor curve.
Correct Answer
True
True. The firm can sell all it wants at the market price, so each worker is worth the marginal product times that price, and the firm hires until that value equals the wage.
Category: Demand for Labor
Question 4
Because marginal revenue exceeds price for a firm with market power, its marginal revenue product curve lies above its value of marginal product curve.
Correct Answer
False
False. A firm with market power must cut its price to sell more, so marginal revenue is below price and the marginal revenue product curve lies below the value of marginal product curve.
Category: Demand for Labor
Question 5
Firms with market power in their output markets tend to hire fewer workers than firms in perfectly competitive industries, other things equal.
Correct Answer
True
True. Because their labor demand is based on marginal revenue, which is below price, these firms reach the point where labor's value equals the wage at a smaller workforce.
Category: Demand for Labor
Question 6
The market demand for a type of labor is the horizontal sum of all individual firms' demand curves for that labor.
Correct Answer
True
True. At each wage, the quantities of labor demanded by every firm are added together to give the market quantity demanded.
Category: Labor Market Equilibrium
Question 7
The market supply curve of labor for an occupation slopes downward, because higher wages drive workers away.
Correct Answer
False
False. The market supply of labor slopes upward: higher wages attract workers from other jobs and from other areas.
Category: Labor Market Equilibrium
Question 8
A change in the market wage shifts a firm's labor demand curve.
Correct Answer
False
False. A change in the wage causes a movement along the labor demand curve, a change in the quantity of labor demanded. The curve shifts only when something else changes, such as the output price or worker productivity.
Category: Labor Market Equilibrium
Question 9
For a monopsony, the marginal cost of hiring one more worker is greater than the wage paid to that worker.
Correct Answer
True
True. To attract another worker the monopsony must raise the wage, and the raise goes to all its workers, so the added cost exceeds the new worker's own wage.
Category: Monopsony
Question 10
Union workers typically leave their jobs sooner than nonunion workers, which raises their employers' hiring and training costs.
Correct Answer
False
False. Union workers tend to stay with an employer longer, which lowers hiring and training costs and helps offset higher union wages.
Category: Unions
Question 11
The share of U.S. workers who belong to unions is lower today than it was in the mid-1950s.
Correct Answer
True
True. Union membership peaked as a share of the workforce around the mid-1950s and has fallen sharply since, especially in the private sector.
Category: Unions
Question 12
The Taft-Hartley Act of 1947 required every worker in a unionized workplace to join the union.
Correct Answer
False
False. The Taft-Hartley Act moved in the other direction, allowing states to pass laws that let workers opt out of union membership in their workplace.
Category: Unions
Question 13
In a bilateral monopoly, employment is lower than it would be in a competitive labor market.
Correct Answer
True
True. The monopsony wants fewer workers to keep wages down, and the union accepts fewer jobs in exchange for higher pay, so both sides push employment below the competitive level.
Category: Bilateral Monopoly
Question 14
A field experiment found that resumes with White-associated names received more interview callbacks than otherwise identical resumes with Black-associated names.
Correct Answer
True
True. Because the resumes differed only in the names, the gap in callbacks is evidence of discrimination in hiring rather than of differences in qualifications.
Category: Employment Discrimination
Question 15
The Equal Pay Act of 1963 created the Equal Employment Opportunity Commission.
Correct Answer
False
False. The Equal Employment Opportunity Commission was created by the Civil Rights Act of 1964. The Equal Pay Act requires equal pay for men and women doing equal work.
Category: Employment Discrimination
Question 16
Discrimination can persist in a competitive market when customers, rather than employers, hold prejudices.
Correct Answer
True
True. If customers prefer to buy from certain groups, even a nondiscriminating employer may lose profits by hiring fairly, so market pressure alone may not end the discrimination.
Category: Employment Discrimination
Question 17
Most of the costs of immigration, such as public schooling, fall on the federal government rather than on state and local governments.
Correct Answer
False
False. State and local governments pay for many of these costs, such as public schools, while the federal government receives much of the income and Social Security tax that immigrants pay.
Category: Immigration
Question 18
Middle- and upper-income households that buy services such as lawn care can benefit from lower prices when the supply of low-skill labor increases.
Correct Answer
True
True. A larger supply of low-skill labor lowers wages in those jobs, which reduces the prices of the services these households buy, while competing low-skill workers bear the cost.
Category: Immigration
Question 19
Women with children tend to earn less than women without children who have similar education and experience.
Correct Answer
True
True. Economists call this pattern the motherhood penalty, and it is one reason the earnings gap between men and women has not closed.
Category: Employment Discrimination
Question 20
Labor income makes up only a small share of total income for most U.S. households.
Correct Answer
False
False. For most people labor is the most valuable resource they own, so most of their income comes from wages, salaries and other labor earnings.
Category: Labor Market Equilibrium