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Economics, 7/e
David Begg, Birkbeck College, University of London
Rudiger Dornbusch
Stanley Fischer

The labour market

Self-test Questions

Select the radio button corresponding to your choice of answer for each question, and then click on "Submit Answers" to find out how many you answered correctly.

1

The substitution effect of a rise in the price of labour will ___________ the quantity of labour and the output effect will __________ it
A)increase, increase
B)increase, reduce
C)reduce, reduce
D)reduce, increase
2

A profit-maximising firm will hire labour until __________ equals the ____________
A)marginal revenue, marginal cost
B)long run marginal revenue, long run marginal cost
C)labour output ratio, capital output ratio
D)marginal cost of labour, marginal revenue product
3

The downward sloping marginal physical product of labour is the firm's ___________
A)supply of labour
B)short-run demand curve for labour
C)marginal cost of labour
D)marginal revenue product of labour
4

The participation rate in the labour force is affected by
A)higher real wages
B)lower fixed costs of working
C)lower non-labour income
D)changes in tastes between leisure and work
E)all of the above
5

Top footballers tend to earn more than lecturers because
A)footballers give more entertainment
B)lecturers are lazy
C)the labour markets are imperfect
D)top footballers are relatively scarce in relation to lecturers
6

Involuntary unemployment exists if workers
A)will not work at the offered wage
B)would work at the going wage but can't find jobs
C)will not work because the hours are anti-social
D)are not prepared to move house to get the job
7

Efficiency wages are _________ that raise ___________
A)low wages, employment
B)high wages, labour supply
C)high wages, productivity
D)high wages, employment
8

Possible causes of involuntary unemployment are
A)minimum wage agreements
B)trade unions
C)scale economies
D)insider-outsider distinctions
E)efficiency wages
F)all of the above
9

As more labour is used the marginal physical product of labour increases
A)TRUE
B)FALSE
10

When we say that labour demand is a derived demand, we are referring to government initiatives to increase employment
A)TRUE
B)FALSE
11

The transfer earnings of a factor are the payments received in excess of its opportunity cost.
A)TRUE
B)FALSE
12

If a worker chooses not to work at the equilibrium wage rate they are involuntarily unemployed
A)TRUE
B)FALSE