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Chapter 12—Labor Markets and Labor Unions
MULTIPLE CHOICE
1. Every individual has a labor supply curve in each market where there is a possible use for his/her
labor.
a. True
b. False
ANS: A PTS: 1 DIF: Easy NAT: Analytic
LOC: Labor markets TOP: Labor Supply
2. The quantity of labor an individual supplies to any market

a. always increases as the market wage rate rises
b. is contingent upon the wage rates offered in other labor markets
c. always decreases as the market wage rate rises
d. could never be zero over the realistic range of wage rates
e. depends only on the opportunity cost of the individual's time in other labor markets
ANS: B PTS: 1 DIF: Moderate NAT: Reflective Thinking
3. If the quantity of labor Sam supplies to a job is zero over the realistic range of wages, Sam
a. is either unwilling or unable to perform the job
b. has not been hired to do the job
c. has not been hired to do the job at the going market wage rate
d. is unable to perform the job
e. is unwilling to perform the job
ANS: A PTS: 1 DIF: Easy NAT: Reflective Thinking
4. If Dian chooses a job with a lower income over one with a higher income, she cannot be maximizing
utility.
a. True
b. False
LOC: Labor markets TOP: Labor Supply and Utility Maximization
5. Jason can maximize his satisfaction by allocating time among market work, nonmarket work, and
leisure so that the final marginal utilities per hour spent in each activity are identical.
a. True
b. False
ANS: A PTS: 1 DIF: Moderate NAT: Reflective Thinking
6. The amount of time an individual is willing to sell on the labor market varies positively with the value
of leisure time.
a. True
b. False
7. A worker's labor supply depends on, among other things, his ability, his preference for the task, and
the opportunity cost of his time.
a. True
b. False
8. Leisure time is not subject to diminishing marginal utility.

a. True
b. False
ANS: B PTS: 1 DIF: Easy NAT: Analytic
9. A consumer maximizes utility by allocating time so that the expected marginal utilities of the last unit
of time spent in each activity are identical.
a. True
b. False
ANS: A PTS: 1 DIF: Moderate NAT: Analytic
10. As the wage rate increases, the income effect tends to reduce the quantity of labor supplied to the
market.
a. True
b. False
11. Nonmarket work includes time spent

a. producing goods and services for your employer
b. pursuing hobbies and crafts
c. engaging in strenuous physical exercise to reduce your weight
d. producing your own goods and services
e. managing your own firm
ANS: D PTS: 1 DIF: Easy NAT: Analytic
12. Market work includes activities such as

a. practicing your golf game
b. studying for an economics exam
c. teaching a college economics course
d. picking up empty cans for the bottle deposit
e. picking strawberries for your own use
ANS: C PTS: 1 DIF: Moderate NAT: Reflective Thinking
13. Leisure is
a. not subject to the law of diminishing utility because you can never have enough leisure
time
b. not subject to the law of diminishing utility because you can derive utility only from goods
and services
c. subject to the law of diminishing utility, just as the consumption of goods and services is
d. subject to the law of diminishing utility only if it involves the consumption of goods and
services
e. not considered in maximizing utility
ANS: C PTS: 1 DIF: Easy NAT: Analytic
14. Leisure is
a. subject to the law of diminishing marginal utility
b. usually considered an inferior good
c. a complementary good with nonmarket work
d. a complementary good with market work
e. an irrational way to spend valuable time
15. Which of the following is not a form of nonmarket work?

a. working on your car at home
b. doing your laundry in a laundromat
c. making bread for a dinner at your sister's house
d. caring for your sister's children as a favor
e. babysitting for a fee
ANS: E PTS: 1 DIF: Easy NAT: Reflective Thinking
16. In what three ways do people use their time?

a. market work, selling labor in the labor market, and leisure
b. producing their own goods and services, nonmarket work, and market work
c. nonwork, work, and leisure
d. market work, nonmarket work, and leisure
e. market work, nonwork, and leisure
17. Work is an attractive use of your time

a. if the utility of consumption made possible by work exceeds the disutility of work itself
b. whenever you are paid a wage equal to or greater than the minimum wage
c. whenever you derive utility from the consumption made possible through work
d. unless time spent working is a source of disutility
e. only when marginal utility is negative for an additional unit of leisure
18. An extra hour of market work is an attractive use of your time

a. because of the utility generated by goods made possible through the extra work
b. solely because of the personal satisfaction it generates
c. when the disutility of income generated by the extra work exceeds the utility
d. when the net utility of the extra goods made possible and the extra work is greater than
zero
e. only when you do not enjoy leisure time
ANS: D PTS: 1 DIF: Moderate NAT: Reflective Thinking
19. Abby maximizes utility by allocating time among leisure, market work, and nonmarket work so that
the
a. total utility of each is equal
b. average utility of each is equal
c. total utility per hour of each is equal
d. marginal utility per hour of each is equal
e. maximum amount of goods and services can be acquired
20. The amount of time an individual is willing to offer for a wage depends on the
a. all of the following
b. value of time devoted to leisure activities
c. boredom, discomfort, and aggravation associated with work
d. value of time devoted to nonmarket work
e. satisfaction gained from goods purchased with the wages
21. Individuals maximize utility in allocating their time only when

a. any change in their use of time reduces their total satisfaction
b. they consciously and carefully weigh the expected marginal utilities per unit
c. they consciously and carefully weigh the actual marginal utilities per unit of time spent in
each activity
d. the expected average utility of each activity is equal
e. people make a concerted effort to measure satisfaction
22. Jamal maximizes utility by allocating his time among leisure, market work, and household work so
that
a. expected marginal utility is equal among all three
b. expected total utility per hour is equal among all three
c. expected marginal utility per hour is equal among all three
d. the maximum amount of goods and services can be acquired
e. expected total utility of each use is equal
23. People make mistakes in allocating their time

a. because they always act irrationally
b. despite always having expectations fulfilled
c. only when leisure is a normal good
d. because acquiring information is costly
e. more often when the cost of making a mistake is high
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
24. People make mistakes in allocating their time

a. only when leisure time is an inferior good
b. because expectations are not always fulfilled
c. more often when the cost of making a mistake is high
d. only when economists remove the assumption that individuals are rational
e. because information is free and readily available
25. A newly acquired microwave oven and a food processor will increase Chuck's productivity in the
kitchen. Accordingly, he will
a. cook more and eat out less
b. cook less and eat out more
c. buy more ready-to-eat foods
d. be more likely to hire a cook
e. increase the quality of what he cooks but may or may not cook more
26. If Marie buys a sailboat, which increases the productivity of her leisure time, she
a. increases her productivity of nonmarket work
b. increases her productivity of market work
c. will spend less time in nonmarket work
d. will spend less time in leisure activities
e. will spend more time in market work to pay for the boat's maintenance
27. If Jin-Ho buys a personal computer to maintain household financial records and prepare budgets, he
a. will spend less time in nonmarket work
b. will spend more time engaged in leisure activities
c. will increase the productivity of market work
d. is less likely to hire tax preparation services on the market
e. is less likely to prepare his own income tax returns at home
ANS: D PTS: 1 DIF: Hard NAT: Reflective Thinking
28. People who can earn higher market wages, other things constant, will
a. provide more labor to nonmarket work
b. be more inclined to supply their labor to market work than to nonmarket work
c. be more inclined to supply their labor to nonmarket work than to market work
d. provide more labor to nonmarket work even if the market can provide the services more
cheaply
e. provide less labor to market work and more labor to nonmarket work
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
29. People who gain greater enjoyment from leisure activities
a. allocate more time to leisure
b. allocate more time to market work
c. allocate more time to nonmarket work
d. generally earn higher market wages
e. generally earn lower market wages
30. People who are more productive in market work

a. produce less for themselves
b. spend more time engaged in nonmarket work
c. work fewer hours in market work and enjoy more leisure
d. are more likely to acquire skills and education through nonmarket work
e. are attracted to market employment at lower wages
31. People who can earn higher market wages

a. have a greater net utility associated with nonmarket work
b. supply more hours to market work than people with lower wages
c. are less likely to perform nonmarket work
d. are more likely to view leisure as an inferior good
e. experience less disutility associated with market work
32. A college dean has a __________ opportunity cost of __________ than a college student working in a
minimum-wage job.
a. lower; leisure
b. lower; nonmarket work
c. lower; market work
d. higher; nonmarket work
e. higher; market work
ANS: D PTS: 1 DIF: Easy NAT: Reflective Thinking
33. A college student working in a minimum-wage job has a __________ opportunity cost of __________
than a college dean.
a. lower; market work
b. lower; leisure
c. higher; market work
d. higher; nonmarket work
e. higher; leisure
34. Which of the following would be considered leisure?

a. picking strawberries for your own use
b. running a 10-mile training session
c. studying for a college mathematics class
d. changing the oil and oil filter on your car
e. weeding your garden
ANS: B PTS: 1 DIF: Easy NAT: Reflective Thinking
35. The demand for labor curve bends backward whenever the income and substitution effects work in
opposite directions.
a. True
b. False
LOC: Labor markets TOP: Wages and Individual Labor Supply
36. If a person's labor supply curve is positively sloped, the income effect outweighs the substitution
effect.
a. True
b. False
37. If the substitution effect dominates the income effect, then an increase in the wage rate will increase
the quantity of labor supplied by an individual.
a. True
b. False
38. As the wage rate increases, the substitution effect causes workers to supply more time to market work
and the income effect causes them to supply less time to market work.
a. True
b. False
39. The individual supply curve of labor is backward bending because the substitution effect offsets the
income effect at higher wage rates.
a. True
b. False
40. If leisure is a normal good, then a decrease in income __________ the time allocated to __________.
a. decreases; market work
b. decreases; leisure
c. decreases; nonmarket work
d. increases; leisure
e. increases; market work, nonmarket work, and leisure time
41. If nonmarket work is a normal good, then an increase in income __________ the time allocated to
__________.
a. decreases; market work
b. decreases; leisure
c. increases; market work
d. increases; leisure
e. increases; nonmarket work
ANS: E PTS: 1 DIF: Moderate NAT: Reflective Thinking
42. People generally view leisure

a. as an inferior good
b. as a normal good
c. as a source of disutility
d. as more valuable per unit the more they have of it
e. as unrelated to utility maximization
43. Because leisure is a normal good, an increase in income

a. decreases the demand for leisure time and reduces the amount of time allocated to market
work
b. decreases the demand for leisure time and increases the amount of time allocated to
market work and/or nonmarket work
c. increases the demand for leisure time and reduces the amount of time allocated to market
work and nonmarket work
d. increases the demand for leisure time and increases the amount of time allocated to market
work and nonmarket work
e. has no impact on the demand for leisure time
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
44. By itself, the substitution effect of an increase in the wage rate will
a. always lead to an increase in the quantity of labor supplied
b. always lead to a decrease in the quantity of labor supplied
c. lead to an increase in the quantity of labor supplied only if leisure is like a normal good
d. lead to an increase in the quantity of labor supplied only if leisure is not a normal good
e. lead to an increase in the quantity of labor supplied only if the income effect works in the
same direction
ANS: A PTS: 1 DIF: Hard NAT: Reflective Thinking
45. The income and substitution effects of a change in the wage rate
a. always work in the same direction
b. always work in opposite directions
c. work in opposite directions only if the change is a decrease
d. work in the same direction only if the change is an increase
e. work in the same direction only if the change is a decrease
ANS: B PTS: 1 DIF: Hard NAT: Reflective Thinking
46. The substitution effect in the labor supply decision refers to

a. substituting leisure for work as the wage rate rises
b. substituting market work for nonmarket work as the wage rate falls
c. working more hours as the wage rate falls
d. working fewer hours as the wage rate rises
e. substituting market work for leisure or nonmarket work as the wage rate rises
ANS: E PTS: 1 DIF: Moderate NAT: Analytic
47. The income effect of a decrease in the wage rate causes the quantity of labor supplied to
a. increase
b. increase only if the individual desires more leisure time
c. increase only if the substitution effect outweighs the income effect
d. decrease
e. decrease only if the substitution effect is weaker than the income effect
48. The substitution effect of a decrease in the wage rate causes the quantity of labor supplied to
a. increase
b. increase only if the individual desires more leisure time
c. increase only if the substitution effect outweighs the income effect
d. decrease
e. decrease only if the individual lowers the value of leisure time
49. For a typical person who is currently earning a low wage rate, the
a. substitution effect of a wage rate increase usually is stronger than the income effect
b. substitution effect of a wage rate increase usually is weaker than the income effect
c. income effect of a wage rate increase is usually zero
d. substitution effect of a wage rate increase is usually zero
e. substitution and income effects of a wage rate increase tend to work in the same direction
50. If my wage rate increases, utility maximization requires that my quantity of labor supplied
a. increase
b. decrease
c. increase if the income effect dominates the substitution effect
d. increase if the substitution effect dominates the income effect
e. increase if the substitution effect equals the income effect
51. As the wage rate falls, a utility-maximizing individual's quantity of labor supplied
a. increases
b. decreases
c. increases if the income effect outweighs the substitution effect
d. decreases if the substitution effect outweighs the income effect
e. decreases if the income effect outweighs the substitution effect
ANS: C PTS: 1 DIF: Hard NAT: Reflective Thinking
52. As the wage rate decreases, the amount of time spent on market work usually
a. increases because the opportunity cost of nonmarket work increases
b. increases because of the substitution effect
c. decreases because of the income effect
d. decreases because the value of leisure time increases
e. decreases because the opportunity cost of leisure declines
ANS: E PTS: 1 DIF: Hard NAT: Reflective Thinking
53. At a low wage rate,

a. there is no substitution effect
b. there is no income effect
c. the substitution effect usually outweighs the income effect
d. the income effect usually outweighs the substitution effect
e. the disutility of market work is usually high
54. An increase in the wage rate will lead to a reduction in the quantity of labor supplied if
a. the substitution effect outweighs the income effect
b. the income effect outweighs the substitution effect
c. the opportunity costs of leisure do not increase
d. the opportunity costs of working always increase
e. workers are irrational because otherwise they would be violating the law of supply
55. The average work week in the United States has declined to fewer than 40 hours even though wage
rates have been increasing. The best explanation of this phenomenon is that
a. the labor supply curve shifted to the right
b. the labor demand curve shifted to the right
c. the income effect of rising wages outweighed the substitution effect
d. the income effect of rising wages could not outweigh the substitution effect
e. none of the above
ANS: C PTS: 1 DIF: Easy NAT: Reflective Thinking
56. Along a backward-bending labor supply curve, the

a. income effect always dominates the substitution effect
b. substitution effect always dominates the income effect
c. substitution effect is always equal to the income effect
d. substitution effect dominates the income effect at high wage rates
e. substitution effect dominates the income effect at low wage rates
57. If the substitution effect is always greater than the income effect, then an individual's labor supply
curve will
a. bend backward
b. always have a positive slope
c. always have a negative slope
d. be vertical
e. be horizontal
58. Which of the following statements would be represented by a backward-bending labor supply curve?
a. A $50,000-a-year professor works more hours than a $20,000-a-year professor.
b. The CEO of a major computer manufacturer works more hours than the union workers.
c. The owners of a successful business work fewer days than do their employees.
d. Hospital janitors work fewer hours than does the chief of obstetrics.
e. High-ranking executives are more likely to work past 5:00 p.m. than are middle managers.
NARRBEGIN: Exhibit 12-1

Exhibit 12-1
NARREND
59. Along which part of the labor supply curve in Exhibit 12-1 does the substitution effect of a wage
change outweigh the income effect?
a. between points a and b
b. between points a and c
c. between points b and c
d. between points b and d
e. between points c and d
60. Along which part of the labor supply curve in Exhibit 12-1 does the income effect of a wage change
outweigh the substitution effect?
61. Along which part of the labor supply curve in Exhibit 12-1 does the income effect of a wage change
just equal the substitution effect?
62. Which of the following statements regarding labor supply is false?

a. Jerry's labor supply curve can bend backward if the income effect of a higher wage rate
outweighs the substitution effect.
b. Bob's labor supply curve will not bend backward if the wage rate is never so high that the
income effect outweighs the substitution effect.
c. If there is a wage rate above which the income effect is at least as great as the substitution
effect, the labor supply curve will be vertical or bend backward.
d. The labor supply curve will slope upward if the income effect dominates the substitution
effect.
e. Hayden's offer to work more hours as the result of a wage increase suggests that the
substitution effect dominates the income effect.

Exhibit 12-2
NARREND
63. In Exhibit 12-2, which of the following is true if the wage rate decreases from $14 to $6 per hour?
a. The income effect dominates the substitution effect.
b. The substitution effect dominates the income effect.
c. No labor is supplied.
d. The income effect equals the substitution effect.
e. The supply curve is horizontal.
64. In Exhibit 12-2, which of the following is true at a wage rate of $14?

Exhibit 12-3
NARREND
c. The income effect exactly offsets the substitution effect.
d. No labor is supplied.
e. The individual will supply 30 hours of labor.
67. In Exhibit 12-3, which of the following is true when the wage rate increases from $9 to $11?
a. The substitution effect will cause the person to work more hours.
b. The income effect will cause the person to work more hours.
c. The substitution effect will cause the person to work fewer hours.
d. The income effect will cause the person to work the same number of hours.
e. The substitution effect will cause the person to work the same number of hours.
68. In Exhibit 12-3, which of the following is true when the wage rate increases from $11 to $13?
a. The substitution effect will cause the person to work more hours.
b. The income effect will cause the person to work more hours.
c. The substitution effect will cause the person to work fewer hours.
d. The income effect will cause the person to work the same number of hours.
e. The substitution effect will cause the person to work the same number of hours.

Exhibit 12-4
NARREND
69. Consider Exhibit 12-4. If the wage rate is $9, how many hours per week will this person work?
a. 30 hours
b. 36 hours
c. 40 hours
d. 45 hours
e. 48 hours
70. In Exhibit 12-4, how much will the employer have to pay per hour to get this worker to work 48 hours
per week?
a. $6
b. $7
c. $9
d. $12
e. less than $12
71. In Exhibit 12-4, when the wage rate increases from $9 to $12, the substitution effect outweighs the
income effect.
a. True
b. False
72. In Exhibit 12-4, when the wage rate rises above $12, the substitution effect outweighs the income
effect.
a. True
b. False
73. Which of the following suggests that people have no control over the number of hours they work?
a. Most workdays last from 8 a.m. to 5 p.m.
b. People make use of the opportunity for overtime.
c. People make use of the opportunity to moonlight.
d. People make use of early retirement options.
e. Many workers hold more than one job.
74. College students often spend summers in internships that pay little or no income because internships
provide benefits in the form of higher future incomes.
a. True
b. False
LOC: Labor markets TOP: Nonwage Determinants of Labor Supply
75. Other things equal, the wage rate will be higher in a job that requires close monitoring by a supervisor
since few individuals are eager to work in such an environment.
a. True
b. False
76. Sharon wants a career as an accountant. During the summer she turns down a job painting houses at $6
an hour to work in an accounting office for $4 an hour. Which of the following would not explain her
choice?
a. Accounting is more prestigious.
b. The summer accounting job will help her get a full-time job in accounting when she
graduates.
c. She prefers to work inside.
d. She would face the law of diminishing marginal utility if she had more goods.
e. She dislikes the messiness of painting.
77. Bob and Mary each have a Ph.D. in economics. Bob has a job in private industry at which he earns
$90,000 a year. Mary earns half that much as a college professor. Which of the following could not
explain Mary's career choice?
a. She experiences diminishing marginal utility.
b. She enjoys the flexibility of her schedule.
c. She enjoys teaching.
d. She enjoys the informal atmosphere of a college.
e. She likes having her summers free to do research.
78. Which of the following would reduce the supply of an athletic trainer's services at today's wage rate,
other things constant?
a. a reduction in the individual's income from other sources
b. an improvement in the quality of the work environment
c. an increase in the amount of control the trainer has over the use of time on the job
d. a trainer's future earning possibilities go down due to a new negative image associated
with this work
e. an increase in the trainer's preference for this type of work
79. A large inheritance from a relative will tend to

a. cause movement up and to the right along your labor supply curve
b. cause movement down and to the left along your labor supply curve
c. shift your labor supply curve outward
d. shift your labor supply curve inward
e. make the income effect of a wage increase positive
80. A person who wins a large sum of money in the state lottery is likely to
a. increase the amount of market work offered at each wage rate
b. not change the amount of work offered at each wage rate
c. decrease the amount of work offered at each wage rate
d. substitute market work for leisure time due to the substitution effect
e. substitute market work for leisure time due to the income effect
81. The market labor supply curve is

a. the sum of individual labor supply curves at each quantity of labor
b. the sum of individual labor supply curves at each wage rate
c. the average of all individual labor supply curves
d. the sum of the upward-sloping portions of individual labor supply curves
e. the sum of the downward-sloping portions of individual labor supply curves
LOC: Labor markets TOP: Market Supply of Labor
82. The market labor supply curve is the sum of

a. individual labor supply curves at each wage rate
b. the upward-sloping portions of individual labor supply curves
c. the downward-sloping portions of individual labor supply curves
d. the average of all individual labor supply curves
e. individual labor supply curves at each net utility for market work
83. The market labor supply curve is usually __________ over the relevant range of market wage rates.
a. positively sloped
b. negatively sloped
c. backward bending
d. vertical
e. horizontal
84. The market labor supply curve is the

a. vertical sum of the individual labor supply curves
b. horizontal sum of the individual labor supply curves
c. vertical difference of the individual labor supply curves
d. horizontal difference of the individual labor supply curves
e. average of the individual labor supply curves
85. An increase in labor supply will increase the equilibrium wage rate.
a. True
b. False
LOC: Labor markets TOP: Why Wages Differ
86. An increase in the wage rate will decrease the demand for labor.
a. True
b. False
87. Jobs that pay higher salaries must be riskier than lower-paying professions.
a. True
b. False
88. Jobs in rural areas generally pay lower wages than jobs in urban areas because there are limits to labor
mobility.
a. True
b. False
89. The equilibrium wage

a. is the same in all labor markets
b. occurs where the supply of labor curve begins to bend backward
c. cannot be calculated because there are so many labor markets
d. is determined by the market demand for labor and the market supply of labor
e. is irrelevant because of unions
90. Which of the following could explain an increase in demand for labor?
a. additional training that increases the productivity of each unit of labor in this market
b. an increase in the amount of risk associated with this job
c. a decrease in the amount of risk associated with this job
d. an improvement in the working conditions associated with this job
e. a decline in the working conditions associated with this job
91. Which of the following could explain an increase in the equilibrium wage rate for a particular job?
a. a decrease in the amount of training needed to perform this job
e. increased migration of workers to this geographic location
92. Which of the following could explain a decrease in the demand for labor in a particular job?
a. additional training that increases the productivity of each unit of labor in this market
e. a decrease in the productivity of each unit of labor in this market
93. Which of the following could not contribute to differences in wage rates across markets?
a. differences in training and education requirements
b. job discrimination
c. differences in risk
d. problems of labor mobility
e. distribution of a new national help-wanted newspaper
94. A stock market crash that reduces the value of an individual's trust fund would tend to
a. increase her supply of labor if the substitution effect outweighs the income effect
b. decrease her supply of labor if the substitution effect outweighs the income effect
c. have no impact on her labor supply decision
d. increase her supply of labor
e. decrease her supply of labor
95. Other things equal, the supply of labor will be higher to a job that
a. offers less prestige
b. offers fewer nonmonetary rewards
c. provides little on-the-job training
d. requires advanced education or skills
e. provides a climate-controlled work environment
ANS: E PTS: 1 DIF: Easy NAT: Analytic
96. Who is likely to earn a higher income, dentists or dental hygienists, and why?
a. dental hygienists because their education is less costly
b. dentists because their education is less costly
c. dental hygienists because their education is more costly
d. dentists because their education is more costly
e. neither; they usually earn the same wage rate
97. An increase in the cost of training to acquire a skill, which must be paid by the worker,
a. increases both the supply of and demand for labor in that market
b. decreases both the supply of and demand for labor in that market
c. increases the supply of labor and decreases the demand for labor in that market
d. decreases the supply of labor and increases the demand for labor in that market
e. decreases the supply of labor only in that market
98. If two accountants have had the same education, amount of experience, and work at the same type of
job for the same profit-maximizing firm, which charges its clients a uniform hourly fee,
a. they should earn the same amount of money
b. the one whose job is riskier should be paid more
c. the one whose job is riskier should be paid less
d. the one who has a higher marginal product (due to ability) should be paid more
e. the one who has a higher marginal product (due to ability) should be paid less
99. Other things equal, the supply of labor will be lower to a job that
a. offers more prestige
b. offers valuable on-the-job training
c. requires advanced skills or education
d. provides a climate-controlled work environment
e. allows for flexible work schedules
100. Other things equal, the supply of labor will be lower to a job that
a. offers less strenuous physical activity
b. requires a supervisor to closely monitor employee performance
c. allows for flexible work schedules
d. offers free room and board
e. is exciting due to slightly elevated risk
101. Other things equal, the supply of labor will be higher to a job that
a. requires a supervisor to closely monitor employee performance
b. provides few opportunities for training
c. has a starting time of midnight
d. requires advanced skills or education
e. has more amenities
102. Which of the following could explain why hockey players earn such high income?
a. All of the following are correct.
b. Average careers are very short; the chances of being unemployed are greater than in many
other jobs.
c. The income effect encourages them to work more as the wage increases.
d. Many people want to become hockey players.
e. The threat of injury makes the job more exciting than other jobs.
103. Two workers are employed in the same job by the same firm; however, they are paid different wage
rates. This could be explained by differences in
a. the income effect
b. the price of the firm's output
c. their marginal products due to differences in ability
d. working conditions
e. risk
104. A medical doctor who specializes in a particular field (e.g., surgery) generally earns more than a
general practitioner because
a. of greater education and training requirements
b. of differences in labor mobility
c. a general practitioner is more likely to work in an urban area
d. of discrimination
e. a general practitioner treats a greater number of patients per day
105. Truck drivers usually earn more than secretaries because

a. drivers require more education and training
b. truck drivers have more flexibility in their daily activities
c. truckers face greater risks
d. secretaries have higher productivity than truckers
e. truckers are discriminated against
106. In many cities, garbage collectors earn more than social workers. What could explain this wage
differential?
a. Social work provides more nonmonetary rewards than garbage collecting does.
b. There is a greater demand for social workers.
c. There is a greater supply of trash collectors.
d. Collecting garbage requires less skill.
e. Social work is a less prestigious profession.
107. Other things equal, the supply of labor will be greater to a job that
a. requires advanced education and training
b. requires most working hours be on weekends
c. requires hard physical labor
d. allows the employee greater discretion in the use of time
e. has a higher probability of injury or death
108. It is sometimes claimed that garbage collectors are paid more than elementary school teachers. If this
is true, one reason might be
a. the difference in working conditions
b. that school teachers are usually women
c. that the supply of teachers is small
d. that the demand for teachers is small
e. that the market does not value teachers
109. In a winner-take-all labor market,

a. anyone who is hired at any wage is a winner
b. any firm that can hire a worker is a winner
c. a few key people critical to the overall success of the enterprise are rewarded with
substantial pay
d. the person most critical to the overall success of an enterprise is rewarded with substantial
pay, and everyone else is paid the median wage
e. only one worker is paid
110. Winner-take-all labor markets are commonly found in

a. sports and entertainment industries
b. unionized industries
c. the government sector
d. the legal services industry
e. service industries in general
111. Two reasons why a few individuals earn very high pay in the sports and entertainment fields are that
their
a. marginal productivity is high and entry into those industries is restricted
b. marginal productivity is high and the cross-elasticity of demand between their services and
the services of other employees is also high
c. marginal productivity is high and there is open competition for their talents
d. wage elasticity of supply is high and there is open competition for their talents
e. marginal productivity is high and they are prohibited from changing employers
112. Since about 1980,

a. production worker pay in the U.S. has grown faster than CEO pay
b. the typical U.S. CEO has come to earn more than the typical NBA basketball player
c. CEO pay in Europe has grown much faster than CEO pay in the U.S.
d. CEO pay in the U.S. has grown to a very large multiple of production worker pay
e. the ratio of CEO pay to production worker pay in the U.S. has not changed much, although
both groups receive much high pay now
113. Most labor negotiations in the United States end without a strike.
a. True
b. False
LOC: Labor markets TOP: Unions and Collective Bargaining
114. Most collective bargaining agreements in the United States are reached
a. only after binding arbitration
b. only after a strike
c. without a strike
d. only after a strike lasting at least three weeks
e. only after government intervention to avoid a strike
LOC: Labor markets TOP: Unions and Collective Bargaining
115. A labor union is a group of
a. employees who join together to improve their working conditions
b. firms that join together to hire workers
c. firms that work together to negotiate better prices in the market
d. farmers who work together to receive better prices for their agricultural products
e. workers and firm owners who join together to improve working conditions
LOC: Labor markets TOP: Types of Unions
116. Unions whose membership is confined to workers with a particular skill are known as
a. industrial unions
b. limited unions
c. regional unions
d. craft unions
e. inclusive unions
117. Which of the following groups is a craft union?

a. auto workers
b. steel workers
c. writers
d. government employees
e. construction workers
118. Unions whose membership includes all workers in a particular product market, whether skilled or
unskilled, are known as
a. craft unions
b. exclusive unions
c. national unions
d. regional unions
e. industrial unions
119. Industrial unions in the United States formed a national organization known as
a. the National Union
b. the Knights of Labor
c. the American Federation of Labor (AFL)
d. the Congress of Industrial Organizations (CIO)
e. the AFL-CIO
120. A labor union is a group of workers and business owners who join together to improve working
conditions.
a. True
b. False
121. Collective bargaining is the process by which a labor union and a firm negotiate an employment
contract.
a. True
b. False
LOC: Labor markets TOP: Collective Bargaining, Mediation, and Arbitration
122. Unions and employers use collective bargaining to negotiate

a. wages only
b. wages and employee benefits only
c. employee benefits only
d. working conditions only
e. wages, employee benefits, and working conditions
123. Through collective bargaining,

a. representatives of an employer negotiate with the rank and file of the union membership
b. union and nonunion members combine forces in negotiation
c. craft and industrial unions combine forces in negotiation
d. contracts are worked out between representatives of the union and employer
representatives
e. union workers must accept contracts negotiated by their representatives
124. The process by which union and management representatives negotiate a mutually agreeable contract
specifying wages, benefits, and working conditions is called
a. collective bargaining
b. mediation
c. arbitration
d. striking
e. litigation
125. In the collective bargaining process, once the United Auto Workers and General Motors
representatives agree on a contract, the union members
a. must accept the contract
b. may reject the contract and must then have their representatives continue negotiations
c. may reject the contract and must then go on strike
d. may reject the contract and must then vote on whether to strike or to continue negotiations
e. may reject the contract and must then seek employment with a different firm
126. If the government intervenes in a labor dispute and requires settlement through binding arbitration,
what takes place?
a. A neutral third party makes a decision that both parties must accept.
b. A neutral third party makes a decision that both parties may reject.
c. One party sues the other in court.
d. The two parties negotiate an agreement without assistance and both must accept it.
e. The two parties negotiate an agreement with assistance from their attorneys and both must
accept it.
127. In a labor negotiation, a mediator

a. represents the union rank-and-file members
b. represents the management side
c. is an impartial observer
d. can call a strike
e. can force both sides to agree to a contract
128. An impartial observer who listens to both sides in a labor-management dispute and makes suggestions
as to how the two sides could compromise is called
a. a mediator
b. an arbitrator
c. a litigator
d. a scab
e. a judge
129. The process by which union members and the firm's management negotiate a contract is called
a. settlement negotiation
b. collective bargaining
c. a union contract
d. collection arbitration
e. settlement bargaining
130. An impartial observer who attempts to settle disagreements by listening to both sides separately and
making suggestions is called a(n)
a. collective bargaining agent
b. arbitrageur
c. mediator
d. binding negotiator
e. judge
131. In order for a strike to be successful, the union must decrease the supply of both union and non-union
labor.
a. True
b. False
LOC: Labor markets TOP: The Strike
132. Strikes are expensive for

a. workers only because their income falls
b. employers only because their revenue falls
c. the public only because output falls
d. both the public and employers because workers are compensated by the union for lost
income
e. workers, employers, and the public
133. The threat of a strike

a. can serve as an incentive for labor and management to reach an agreement
b. destroys incentives for labor and management to reach an agreement
c. is usually not taken seriously because employers know the workers will suffer during a
strike
d. is not taken seriously unless management expects to suffer
e. is not taken seriously if public safety is at risk
134. The success of a strike depends on the union's ability to

a. do all of the following
b. reduce the supply of labor to the firm
c. reduce the supply of scabs to the firm
d. remain unified
e. endure the strike
135. The source of power for a labor union is its ability to

a. increase the supply of labor
b. decrease the demand for capital
c. increase the quantity supplied of labor
d. decrease the quantity supplied of labor
e. decrease the supply of labor
136. Unions can increase their wage rates by

a. all of the following
b. decreasing the supply of labor
c. using the threat of a strike
d. increasing the proportion of union workers in the industry
e. increasing the demand for the product they produce and, therefore, the demand for their
labor services
LOC: Labor markets TOP: Union Wages and Employment
137. In a labor market dominated by a union, the supply of labor to a firm is depicted as a horizontal line.
a. True
b. False
LOC: Labor markets TOP: Inclusive, or Industrial, Unions
138. If a union negotiates a wage greater than the competitive wage, the total union wage bill will
necessarily decrease.
a. True
b. False
139. An industrial union is a union composed of workers in the same skilled profession.
a. True
b. False
140. If an industrial union is able to negotiate a wage above the competitive market-clearing wage,
employment in the industry will increase.
a. True
b. False
141. Which of the following union tactics, if successful, would increase wages and create a surplus of
labor?
a. collective bargaining to fix the wage above the competitive level
b. decreasing the marginal revenue product of the union workers
c. increasing the demand for union-made products
d. restricting the supply of nonunion products that compete with union-made products
e. increasing labor productivity by minimizing conflicts and resolving differences between
labor and management
142. An industrial union can obtain a wage higher than the competitive level
a. without any change in total employment
b. at the cost of a reduction in total employment
c. and achieve higher total employment as well
d. and achieve the same or higher total employment
e. thus increasing the quantity of labor demanded
143. An industrial union can obtain a wage higher than the competitive level
a. without any change in total employment
b. at the cost of a reduction in total employment
c. and achieve higher total employment as well
d. and achieve the same or higher total employment
e. thus increasing the quantity of labor demanded
144. When industrial unions negotiate with an entire industry, wage gains come at the cost of
a. longer working hours
b. worse working conditions
c. reduced total employment
d. worse products
e. longer hours
145. If a union negotiates a wage above the market equilibrium, each firm hiring union members faces
a. a perfectly inelastic supply curve for labor
b. a perfectly elastic supply curve for labor
c. a perfectly inelastic demand curve for labor
d. a perfectly elastic demand curve for labor
e. perfectly inelastic supply and demand curves for labor
146. If a union negotiates a wage above the market equilibrium, each firm's
a. supply of labor is greater than its marginal resource cost
b. supply of labor is less than its marginal resource cost
c. supply of labor is equal to its marginal resource cost
d. demand for labor is less than its marginal resource cost
e. demand for labor is greater than its marginal resource cost
147. If a teachers' union negotiates the wage for all college professors, the market supply curve of college
professors
a. is perfectly elastic everywhere
b. is perfectly inelastic everywhere
c. is horizontal and then it slopes upward
d. is vertical and it slopes upward
e. slopes upward and then becomes horizontal
ANS: C PTS: 1 DIF: Hard NAT: Analytic
148. Union wages in the United States are, on average,

a. equal to nonunion wages
b. twice as high as nonunion wages
c. half of nonunion wages
d. 15 percent higher than nonunion wages
e. 50 percent higher than nonunion wages
149. If an industrial union would strike if it does not receive a particular wage rate, then the supply curve of
labor in this market
a. is horizontal at that particular wage rate until it intersects the original supply of labor curve
b. is vertical at that particular wage rate until it intersects the original supply of labor curve
c. shifts to the left
d. disappears
e. slopes downward
150. If the United Mine Workers successfully negotiates a wage that is higher than the competitive wage,
a. an excess demand for labor is created
b. a surplus of labor is created
c. the demand for labor increases
d. the supply of labor decreases
e. the quantity of labor demanded increases
151. If the United Auto Workers successfully negotiates a wage that is higher than the competitive wage,
a. there is no excess supply of labor because everyone who wants to work at the union wage
can get a job
b. there is no excess demand for labor because everyone who wants to work at the union
wage can get a job
c. the union must ration the available jobs
d. all workers are better off
e. more workers are employed than at the competitive wage

Exhibit 12-5
NARREND
152. Consider Exhibit 12-5. If a union imposes a wage floor at $5, then
a. the excess demand for labor will lead to unemployment
b. the excess supply of labor will cause the wage to fall to $4
c. fewer people will be hired than would be in a competitive market
d. the excess demand for labor will lead to a drop in wages
e. the excess demand for labor will lead to an increase in wages
153. If union demands result in a surplus of labor in some industries, the resulting
a. increased demand for labor in the nonunion sector drives nonunion wages up
b. decreased demand for labor in the nonunion sector drives nonunion wages down
c. increased supply of labor in the nonunion sector drives nonunion wages down
d. increased supply of labor in the nonunion sector drives nonunion wages up
e. decreased supply of labor in the nonunion sector drives nonunion wages up
154. An industry with a strong union (e.g., UAW)

a. will increase wages in the nonunion sector of the industry
b. will increase employment for union workers when wages increase
c. can force employers to hire all unions members regardless of the wage
d. can increase the demand for union workers by increasing turnover and reducing
productivity
e. can bargain for wages that are greater than the market's equilibrium wage

Exhibit 12-6
NARREND
155. If the market represented in Exhibit 12-6 is allowed to operate freely, total employment in the market
will be
a. 10 workers
b. 12 workers
c. 600 workers
d. 720 workers
e. 800 workers
156. In Exhibit 12-6, if a union raises the wage to $4, total employment in the market will be
a. 10 workers
b. 12 workers
c. 600 workers
d. 720 workers
e. 800 workers
157. If the market in Exhibit 12-6 is allowed to operate freely, total employment by the typical employer
(illustrated in the right-hand panel) will be
a. 10 workers
b. 12 workers
c. 600 workers
d. 720 workers
e. 800 workers
158. In Exhibit 12-6, if a union raises the market wage to $4, total employment by the firm (in the
right-hand panel) will be
a. 10 workers
b. 12 workers
c. 600 workers
d. 720 workers
e. 800 workers
159. Consider Exhibit 12-6. If firms in this market are identical, how many firms are hiring in this labor
market?
a. 50
b. 60
c. 67
d. 72
e. 80
160. Assume an industrial union is formed and establishes the wage rate at $4 in Exhibit 12-6. The reason
the wage rate will not fall to the competitive equilibrium level is that
a. all workers are wealthier in disequilibrium
b. nonunion workers are poorer than union workers
c. there is excess demand for labor at equilibrium
d. there is excess supply of labor at equilibrium
e. wages are determined by collective negotiation, not individual negotiation
ANS: E PTS: 1 DIF: Hard NAT: Analytic
161. If an industrial union is able to negotiate a wage above the market-clearing wage, employment in the
industry will
a. increase
b. decrease
c. increase, if the union can restrict the supply of labor
d. increase, if the union can increase the supply of labor
e. decrease due to the strike-breaking activity of the firm
162. If an industrial union is able to negotiate a wage above the market-clearing wage, the non-union wage
in other industries will
a. increase
b. decrease
c. increase, if the union can restrict the supply of labor
d. increase, if the union can increase the supply of labor
e. decrease due to the strike-breaking activity of the firm
163. If a union raises initiation fees significantly and if employers in the industry hire only union workers,
the supply of union labor curve will shift to the left.
a. True
b. False
LOC: Labor markets TOP: Exclusive, or Craft, Unions
164. If a professional association restricts membership and firms cannot employ nonassociation workers,
the equilibrium wage will increase.
a. True
b. False
165. A craft union is a union composed of all the workers at a single firm.
a. True
b. False
166. A craft union is a union of workers in

a. the same firm
b. the same industry
c. the same skilled profession
d. different skilled professions
e. different trades

Exhibit 12-7
NARREND
167. The situation represented in Exhibit 12-7 reflects all of the following employment conditions except
one. Which is the exception?
a. collective bargaining by an industrial union for higher wages and benefits
b. high union membership fees
c. imposition of qualifying exams for prospective workers
d. imposition of long apprenticeship periods
e. restriction of employment to union members
168. Exhibit 12-7 reflects which of the following?
a. A union that is restricting the supply of labor.
b. A firm that is restricting the number of job openings.
c. The price of the good produced by this labor is rising.
d. The price of the good produced by this labor is falling.
e. The union that is creating an excess supply of labor.
169. Craft unions typically attempt to increase wages by

a. setting a wage floor
b. reducing labor supply
c. increasing labor demand
d. reducing initiation fees
e. expanding new union memberships
170. Restricting the supply of labor in order to increase the wage

a. is a tactic used by both craft and industrial unions
b. is a tactic more likely to be used by the American Medical Association (AMA) than the
United Auto Workers (UAW)
c. is a tactic more likely to be used by the UAW than the AMA
d. is a tactic used solely by professional groups such as lawyers
e. has less effect on the wage than direct negotiation does
171. In order to reduce labor supply, a union must be able to

a. do all of the following
b. force all employers in the industry to hire only union members
c. set wages
d. agree to wage concessions
e. increase union membership
172. Which of the following may be used by a plumber's union or a medical professional association to
restrict membership?
a. all of the following are correct
b. long apprenticeship periods
c. difficult qualification exams
d. stringent education standards
e. high initiation fees
173. If an electricians' union is successful in its attempts to restrict entry into that craft, it will shift
a. the supply curve of electricians to the right
b. the supply curve of electricians to the left
c. the demand curve for electricians to the right
d. the demand curve for electricians to the left
e. both the supply and demand curves for electricians
174. Craft unions attempt to increase wages in their profession by

a. increasing labor demand
b. decreasing labor demand
c. decreasing labor supply
d. increasing labor supply
e. exclusive dealing contracts
175. Unions can affect the demand for, but not the supply of, labor.
a. True
b. False
LOC: Labor markets TOP: Increasing Demand for Union Labor
176. Featherbedding shifts the marginal revenue product of labor curve to the right.
a. True
b. False
177. Featherbedding is a union practice designed to increase employment of union members.

a. True
b. False
178. Featherbedding ultimately results in greater worker efficiency and therefore greater productivity and
higher wages.
a. True
b. False
179. Of the several ways that the United Auto Workers can increase the wages of its members,
a. none can also increase employment
b. only direct negotiation of a wage above the competitive level can also increase
employment
c. only restricting the supply of labor can also increase employment
d. only increasing the demand for labor can also increase employment
e. only binding arbitration can also increase employment
ANS: D PTS: 1 DIF: Hard NAT: Analytic
180. Which of the following would not shift demand curve for union labor to the right?
a. increased demand for union-made goods
b. increased labor productivity by lowering quit rates
c. increased supply of products that compete with union-made products
d. increased labor productivity through better labor-management relations
e. appeals to consumers to buy only union-made products
181. An appeal to consumers to purchase union-made products represents an attempt to

a. increase the supply of union labor
b. increase the demand for union labor
c. decrease the supply of union labor
d. decrease the quantity demanded of union labor
e. decrease the demand for union labor
182. The United Auto Workers has fought for curbs on imports of foreign-made cars in order to cause
a. a rightward shift in the supply of U.S. cars
b. a leftward shift in the supply of U.S. cars
c. movement to the left along the supply curve for U.S. cars
d. movement to the right along the supply curve for U.S. cars
e. a rightward shift of the demand curve for U.S. cars
183. Unions sometimes try to ensure that employers hire more union labor than they might otherwise prefer
by
a. collective bargaining
b. featherbedding
c. work enlargement
d. restricting the supply of labor
e. increasing the demand for union-made products
184. Which of the following is an example of featherbedding?

a. a craft union's restricting entry into its profession
b. a union-imposed wage floor
c. an increase in labor productivity that results from a decrease in quit rates
d. attempts to reduce the sale of nonunion goods
e. a construction workers union's requiring an unnecessarily large number of workers to do a
particular job
185. If featherbedding raises the price of output produced by the union workers, it
a. increases employment at the firm and in the industry
b. decreases employment at the firm and in the industry
c. increases employment at the firm but may decrease it in the industry
d. decreases employment at the firm and increases it in the industry
e. increases employment at the firm but reduces the number of firms so that there is no net
effect on industry employment
186. It may be that unions increase worker productivity by

a. minimizing conflicts, resolving differences, and reducing job turnover
b. using seniority rules to keep the most experienced workers employed
c. increasing job turnover so that the least experienced workers quit
d. allowing workers to goof off, which improves morale
e. increasing the number of workers required to perform each task

Exhibit 12-8
NARREND
187. Which of the following does Exhibit 12-8 illustrate?

a. The demand for labor increases and wages increase when a union disbands.
b. The supply of labor increases and wages increase when a union disbands.
c. Demanders of labor must pay higher wages after a craft union forms.
d. Demanders of labor must pay higher wages after an industrial union forms.
e. A union causes the productivity of labor to increase, causing an increase in the firm's
demand for labor.
188. Featherbedding by unions is an attempt to

a. increase the demand for union labor
b. increase the demand for non-union labor
c. decrease the demand for union labor
d. increase the supply of union labor
e. increase the supply of non-union labor
189. If a union is able to increase the demand for union-made goods,

a. wages will increase but employment will decrease
b. wages will increase and employment will increase
c. wages will decrease but employment will increase
d. wages will decrease and employment will decrease
e. the demand for non-union labor will increase
190. If a union is able to restrict the supply of a non-union-made substitute product,

a. wages will increase but employment will decrease
b. wages will increase and employment will increase
c. wages will decrease but employment will increase
d. wages will decrease and employment will decrease
e. the demand for non-union labor will increase
191. Union membership has continued to grow faster than the labor force in the United States since World
War II.
a. True
b. False
LOC: Labor markets TOP: Recent Trends in Union Membership
192. Union membership over the last five decades has

a. grown at the same rate as the labor force
b. become much more attractive and has grown more rapidly than the labor force
c. become much more attractive
d. grown more rapidly than the labor force
e. declined
193. The union participation rate in the United States is

a. highest among government employees
b. highest among private sector workers
c. highest in the smokestack industries
d. highest in the service sector
e. higher than in Sweden
194. The union participation rate in the United States is

a. lowest among service workers in the private sector
b. highest among service workers in the private sector
c. lowest among service workers in the public sector
d. highest in heavy industry
e. highest in high-technology industries
195. Which of the following is true of union membership rates in the United States?
a. The rate for males is greater than the rate for females because there are more males in the
service sector.
b. The rate for males is greater than the rate for females because there are more females in
the service sector.
c. The rate for whites is greater than the rate for blacks because there are more blacks in the
service sector.
d. The rate for blacks is greater than the rate for whites because there are more whites in
heavy industry.
e. The rate for blacks is less than the rate for whites because there are more whites in heavy
industry.
196. Which of the following explains the recent decline in union membership in the United States?
a. smaller government safety nets
b. slower technological change
c. the change from a manufacturing to a service-based economy
d. increasing market concentration
e. none of the above
197. Unions are less likely to strike today than in the past because
a. real wages have increased over the last 20 years
b. employers are less willing to hire strike breakers
c. most workers in the U.S. are already union members
d. more workers, both union and nonunion, are willing to cross picket lines
e. many high-profile strikes (e.g., Caterpillar) have succeeded in winning job security
198. Unions are less likely to strike today than in the past because
a. employers are more willing to hire strike breakers
b. fewer workers, both union and nonunion, are willing to cross picket lines
c. most workers in the U.S. cannot permanently lose their jobs
d. real wages have increased over the last 20 years
e. many high-profile strikes (e.g., Caterpillar) have resulted in union victories
199. Currently, union membership in the U.S. is

a. declining as a percentage of the labor force
b. remaining constant
c. increasing as a percentage of the labor force
d. increasing in the service sector
e. decreasing among government employees
200. Union membership rates in the U.S. are

a. highest among government employees
b. highest among industrial sector employees
c. highest among service sector employees
d. increasing at a faster rate than the labor force
e. highest among women
201. One significant reason for the declining membership in unions in the U.S. is
a. more workers are entering the teaching field
b. increasing employment in the industrial sector
c. the structural shift of the economy toward services
d. increasing cultural diversity in the workforce
e. a decrease in the number of public sector employees
202. Union membership in the United States has remained relatively steady since 1955.
a. True
b. False
LOC: Labor markets TOP: Trends in Union Membership
203. All but which of the following is a way for unions to increase the demand for their union labor.
a. increase the demand for union-made goods
b. improve the working conditions for their labor
c. restrict the supply of nonunion-made goods
d. increase the productivity of union labor
e. featherbedding
204. Featherbedding refers to union efforts to force employers to hire more workers than demanded at a
particular wage.
a. True
b. False
205. Binding arbitration is when an impartial observer helps resolve differences between union and
management.
a. True
b. False
206. After reading an economics textbook about labor supply and utility maximization, Amelia Ruiz said,
“I don’t allocate my time like that.” Her professor replied,
a. “You caught us. Economists do not know what they are talking about.”
b. “This proves that you will always choose to spend your time in nonmarket work.”
c. “You act as if you allocated your time to derive the same expected net marginal utility
from the last unit of time spent in each alternative use.”
d. “Don’t you want to use your unlimited resources to satisfy your finite wants?”
e. “It is obvious that labor supply is a derived demand based on marginal revenue product.”
207. Over a typical month, Ying Liao will balance spending time on meals, work, entertainment, study,
sleep, and so on by ensuring that there is equality among the marginal
a. factor costs of each market work activity
b. products of each market work activity
c. revenues from each of the products sold
d. wages of each hour worked
e. expected net utilities of each activity
208. LeBron James went right from high school to the NBA because he had a low opportunity cost of
attending college.
a. True
b. False
209. Which of the following is not an example of a differing taste for work?
a. Some people prefer physical labor and hate office work
b. Some people become airline pilots while others are afraid to fly
c. Winter temperatures are below zero on crab boats off Alaska
d. Teenagers prefer jobs at Starbucks and Gap to those at fast-food restaurants
e. Many people prefer the creative process even though earnings are low
210. Which of the following is not true about taste for work?
a. Everyone ends up in her or his most preferred job
b. The transaction costs of job information and of changing jobs may prevent some desirable
matchups
c. Workers seek jobs in a way that tends to minimize the disutility of work
d. Economists argue that your preferences are stable and you supply more labor to jobs you
like
e. Economists do not try to explain how work preferences develop
211. The relationship between income and education is clear. At every age, those with more education earn
more.
a. True
b. False
212. Caroline Jahn has a professional degree and is 51 years old. Bob Rubate also has a professional degree
and is 29 years old. On average, Caroline most likely earns
a. 75 percent less than Bob
b. 7 percent less than Bob
c. 75 percent more than Bob
d. 7 percent more than Bob
e. the same amount as Bob
213. Because of discrimination, which of the following have systematically earned less than others of equal
ability?
a. only African-Americans
b. only Hispanics
c. only African-Americans and Hispanics
d. African-Americans, Hispanics, and women
e. only Hispanics and women
214. Plumbers and carpenters are examples of industrial unions.

a. True
b. False
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2. The quantity of labor an individual supplies to any market

8. Leisure time is not subject to diminishing marginal utility.

11. Nonmarket work includes time spent

12. Market work includes activities such as

15. Which of the following is not a form of nonmarket work?

16. In what three ways do people use their time?

17. Work is an attractive use of your time

18. An extra hour of market work is an attractive use of your time

21. Individuals maximize utility in allocating their time only when

23. People make mistakes in allocating their time

24. People make mistakes in allocating their time

30. People who are more productive in market work

31. People who can earn higher market wages

34. Which of the following would be considered leisure?

42. People generally view leisure

43. Because leisure is a normal good, an increase in income

46. The substitution effect in the labor supply decision refers to

53. At a low wage rate,

56. Along a backward-bending labor supply curve, the

NARRBEGIN: Exhibit 12-1

62. Which of the following statements regarding labor supply is false?

NARRBEGIN: Exhibit 12-2

NARRBEGIN: Exhibit 12-3

NARRBEGIN: Exhibit 12-4

79. A large inheritance from a relative will tend to

81. The market labor supply curve is

82. The market labor supply curve is the sum of

84. The market labor supply curve is the

89. The equilibrium wage

105. Truck drivers usually earn more than secretaries because

109. In a winner-take-all labor market,

110. Winner-take-all labor markets are commonly found in

112. Since about 1980,

117. Which of the following groups is a craft union?

122. Unions and employers use collective bargaining to negotiate

123. Through collective bargaining,

127. In a labor negotiation, a mediator

132. Strikes are expensive for

133. The threat of a strike

134. The success of a strike depends on the union's ability to

135. The source of power for a labor union is its ability to

136. Unions can increase their wage rates by

148. Union wages in the United States are, on average,

NARRBEGIN: Exhibit 12-5

154. An industry with a strong union (e.g., UAW)

NARRBEGIN: Exhibit 12-6

166. A craft union is a union of workers in

NARRBEGIN: Exhibit 12-7

169. Craft unions typically attempt to increase wages by

170. Restricting the supply of labor in order to increase the wage

171. In order to reduce labor supply, a union must be able to

174. Craft unions attempt to increase wages in their profession by

177. Featherbedding is a union practice designed to increase employment of union members.

181. An appeal to consumers to purchase union-made products represents an attempt to

184. Which of the following is an example of featherbedding?