1. For the supply and demand curves in the diagram, the level of employment will be highest at:

Select one:

a. wage rate W1

b. wage rate W2

c. a wage rate higher than W1

d. a wage rate lower than W2

2. There will be a shortage of labor in a particular market if:

Select one:

a. labor supply increases and demand decreases

b. the current wage is above the wage that would clear the market

c. there is a decrease in the price of a substitute resource

d. the current wage is below the wage that would clear the market

3. If capital and labor are gross complements, an increase in the cost of capital will:

Select one:

a. increase the supply of labor and drive the wage down

b. decrease the demand for labor and drive the wage down

c. increase the demand for labor and drive the wage up

d. either increase or decrease the demand for labor depending on whether the substitution effect or the output effect is stronger

4. All else equal, which of the following will increase the demand for labor in a particular market?

Select one:

a. A decrease in the wage paid to another occupation for which these workers are qualified

b. A decrease in worker productivity

c. An improvement in the nonwage aspects of the job

d. An increase in the number of employers

5. Question 20 refers to the following diagram of a competitive labor market.

Suppose the wage is currently W3 and L1 is the level of employment. Then we should expect the wage to:

Select one:

a. rise and employment to rise

b. rise and employment to fall

c. fall and employment to rise

d. fall and employment to fall

6. Allocative inefficiency in a labor market may be caused by:

Select one:

a. monopoly power in the product market

b. monoposony power in the labor market

c. both A) and B) are correct

d. neither A) nor B) are correct

7. Questions 7 to 10 refer to the following table that shows the short-run production relationship and the product demand schedule for a firm.

The table indicates that:

Select one:

a. the firm sells output in a perfectly competitive market

b. the firm is a monopolist

c. the firm hires labor in a perfectly competitive market

d. the firm is a monopsonist

8. What is the marginal revenue product of the third worker?

Select one:

a. $18

b. $57

c. $72

d. $342

9. What is the value of the third worker marginal product?

Select one:

a. $18

b. $57

c. $72

d. $342

10. How many workers will this firm hire if the wage is $10?

Select one:

a. 3

b. 4

c. 5

d. 6