Q: A firm is considering hiring an additional worker. The worker's marginal product of labor (MPL) is $$15, and the market wage is 13. $$What should the firm do?

Hire the worker because $$\text{MPL} \u003e \text{Wage}.$$

Question 1

A firm in a competitive market will hire workers up to the point where which of the following conditions is met?

Accepted Answer

$$	ext{MPL} = 	ext{Wage}$$

Question 2

Suppose a firm faces diminishing returns to labor. If the firm increases the number of workers while holding capital constant, what happens to the marginal product of labor (MPL)?

Accepted Answer

MPL decreases as more workers are hired.

Question 3

If the market wage for cleaners is $$9 and the marginal product of labor (MPL) for the seventh cleaner is 9$$, how many cleaners will the firm hire?

Accepted Answer

7 cleaners

Question 4

Which of the following best describes the concept of 'human capital' in labor economics?

Accepted Answer

The skills, education, and training that increase a worker's productivity and earning potential.

Question 5

Suppose a new government policy makes college education free, leading to a universal increase in college graduates. What is the most likely effect on the wages of college graduates?

Accepted Answer

Wages will fall because the supply of college graduates increases.

Question 6

Which of the following is an example of a compensating differential?

Accepted Answer

Higher wages paid to workers in dangerous jobs compared to similar jobs that are safe.

Question 7

If a job becomes less risky due to improved safety regulations, what is the expected effect on the wage for that job, holding all else constant?

Accepted Answer

The wage will decrease due to supply-side effects.

Question 8

Which of the following statements about labor unions is most accurate?

Accepted Answer

Unions generally increase wages for their members, which can lead to lower wages for non-members.

Question 9

A firm is considering hiring an additional worker. The worker's marginal product of labor (MPL) is $$15, and the market wage is 13. $$What should the firm do?

Accepted Answer

Hire the worker because $$	ext{MPL} \u003e 	ext{Wage}.$$

Question 10

Which of the following is NOT a type of labor market discrimination discussed in the study materials?

Accepted Answer

Discrimination based on a worker's favorite color.

Question 11

In a competitive labor market, what is the effect of employer-based discrimination on profits?

Accepted Answer

Discriminating employers earn lower profits than non-discriminating employers.

Question 12

If the supply of farm laborers is higher in Mexico than in the US, what does this imply about the labor market?

Accepted Answer

More people are willing to work as farm laborers in Mexico than in the US.

Question 13

Which equation represents the value of the marginal product of labor (VMPL) for a competitive firm?

Accepted Answer

$$	ext{VMPL} = 	ext{MPL} 	imes 	ext{P}$$

Question 14

Which of the following is a real-world example of a compensating differential?

Accepted Answer

Coal miners earning higher wages than office workers due to dangerous working conditions.

Question 15

Which of the following best explains why wages for janitors are higher in the US than in India?

Accepted Answer

Higher demand for janitors in the US due to higher productivity.

Question 16

If a firm is a price-taker in the labor market, what does this imply about its ability to set wages?

Accepted Answer

The firm must accept the market wage and cannot set its own wage.

Question 17

Which of the following is a likely consequence of 'Ban the Box' legislation that prohibits employers from asking about criminal history?

Accepted Answer

Fewer minority hires after the legislation is passed.

Question 18

Which of the following is NOT considered part of the real wage of a job?

Accepted Answer

The color of the uniform provided by the employer.

Question 19

Which of the following is a plausible way to make your human capital less likely to be replaced by AI?

Accepted Answer

Develop skills that require creativity, emotional intelligence, and complex problem-solving.

Labor Markets: Demand, Supply, Equilibrium, and Wage Differentials

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