1. Presume that a 10% increase in the wage results in a 5% reduction in employment. In this case, labor demand is said to be:

A. elastic

B. inelastic

C. unit elastic

2. Which of the following best explains why elasticity varies along a linear demand curve?

A. As the quantity of labor demanded rises, the percentage change in quantity demanded declines (for a given change in labor use) while the percentage change in wage increases.

B.  As the quantity of labor demanded rises, the percentage change in quantity demanded rises (for a given change in labor use) as does the percentage change in the wage.

C. As the quantity of labor demanded rises, the percentage change in quantity demanded declines (for a given change in labor use) as does the percentage change in the wage.

D. As the quantity of labor demanded rises, the percentage change in quantity demanded declines (for a given change in labor use) while the percentage change in wage decreases

3. Labor demand is more elastic when:

A. the scale effect resulting from a wage change is larger

B. the substitution effect resulting from a wage change is larger

C. both is correct

D. none of the above

4. The scale effect associated with a change in the wage is larger when:

A. labor costs are a smaller share of total costs

B. the demand for the final product is more elastic

C. there is many close substitues for this category of labor

D. economics of scale are present in the production of the good

5. The price elasticity of demand for the final products affects the own-wage elasticity of demand for labor by affecting the magnitude of:

A. the scale effect that occurs in the labor market

B. the substitution effect that occurs in the labor market

C. both substitution and scale effects

D. neither substitution or scale effects

6. Unions are expected to attempt to:

A. Reduce the elasticity of demand for the final product

B. Makes it more difficult to replace labor with other resources

C. Support laws that reduce the elasticity of supple of other resources

D. All of the above.

E. None of the above

7. Unions are likely to be less successful in negotiating higher wages in those labor markets in which:

A. labor costs comprise a small share of total costs

B. the demand for the final product is more elastic

C. there is few close substitutes for union workers

D. the price elasticity of supply for other factors of production is relatively high