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Multiple Choice Quiz
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1

The competitive firm faces
A)a perfectly elastic labor supply curve at the market wage.
B)a labor demand curve that is fixed if capital is fixed.
C)a labor demand curve that is perfectly inelastic.
D)both (A) and (B).
E)both (A) and (C).
2

Competitive labor and product markets
A)maximize the number of workers with jobs.
B)minimize firm profits.
C)maximize worker utility.
D)maximize output.
E)none of the above.
3

Competitive factor and product markets lead to
A)wages being equalized for all workers.
B)firms receiving all of the surplus created by the economy.
C)both (A) and (B).
D)neither (A) nor (B).
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 neither labor demand nor labor supply is perfectly elastic or perfectly inelastic.
D)both (A) and (C).
E)both (B) and (C).
6

The Freeman Cobweb Model predicts that
A)students who use the current wage to predict future wages may be in for a rude awakening.
B)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)wages are constant while employment levels adjust across sectors in response to any demand shock.
D)both (A) and (B).
E)all of the above.
7

The Freeman Cobweb Model shows that
A)individuals rarely make mistakes when choosing a career because they can use current wages to predict future wages fairly well.
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 curve
A)is horizontal for a perfectly competitive firm but is upward-sloping for a monopsonist.
B)is horizontal for a perfectly competitive firm but is downward-sloping for a monopsonist.
C)shows the increase in revenue received by the firm if it hires one more worker.
D)simultaneosly equals the wage and the value of marginal product of labor for a monopsonist.
E)none of the above.
9

Monopsony firms
A)pay a wage greater than the marginal cost of labor because they face an upward sloping labor supply curve.
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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