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Multiple Choice Quiz
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1

The competitive firm's:
A)supply of labor is horizontal (i.e., perfectly elastic) at the market wage.
B)demand is the entire the marginal product of labor curve.
C)both (A) and (B).
D)neither (A) nor (B).
2

Competitive labor markets:
A)maximize the number of workers with jobs.
B)minimize firm profits.
C)both (A) and (B).
D)neither (A) nor (B).
3

Competitive markets lead to:
A)wages being equalized across labor markets for "like-skilled" individuals.
B)the additional benefit from working equals the additional cost of foregone leisure only for the last worker hired.
C)stable equilibrium that yields the efficient allocation of resources within the market as long as there is no outside interference.
D)all of the above.
E)none of the above.
4

A payroll tax:
A)reduces the demand for workers.
B)is borne entirely by workers if the supply of labor is perfectly inelastic.
C)reduces the quantity of workers hired if the supply of labor is perfectly inelastic.
D)both (A) and (B).
E)all of the above.
5

The burden of a payroll tax is paid:
A)exclusively by workers if the supply of labor is perfectly elastic.
B)exclusively by workers if the supply of labor is perfectly inelastic.
C)is shared by workers and firms if the elasticities of demand and supply of labor are between zero and infinity.
D)both (A) and (C).
E)both (B) and (C).
6

The Freeman Cobweb Model predicts that:
A)Students use the current wage to predict future wages.
B)that an outside perturbation to a labor market can lead the wage to cycle around its equilibrium with the cycle eventually converging to the equilibrium wage.
C)both (A) and (B).
D)neither (A) or (B).
7

The Freeman Cobweb Model shows that:
A)individuals rarely make mistakes when choosing a career because they can extrapolate fairly accurately about future wages.
B)current wages are the best predictor of future earnings.
C)markets for various occupations can "cycle" around the equilibrium.
D)individuals who make career choices always over-estimate what they will earn.
E)none of the above.
8

The marginal cost of labor (MCE):
A)curve is horizontal for a perfectly competitive firm but upward-sloping for a monopsonist.
B)curve is horizontal for a perfectly competitive firm but is downward sloping for a monopsonist.
C)curve shows the increase in revenue received by the firm if it hires one more worker.
D)is equal to wage and VMPE for a monopsonist.
9

Monopsony firms:
A)pay a wage greater than the MCE because their supply curves are upward sloping.
B)will behave as if they are competitive if a minimum wage is imposed at the competitive wage.
C)will hire more workers if a minimum wage is imposed below the monopsony wage.
D)all of the above.
10

A minimum wage imposed in a monopsony market can:
A)increase both wages and employment.
B)increase wages but lower employment.
C)have no effect on wages or employment.
D)do all of the above.





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