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Economic
Q:
Table 18-9Income Tax BracketMarginal Tax Rate$0 - 6,00010%6,001 - 20,00015%20,001 - 44,50022%44,501 and over30%Table 18-9 shows the income tax brackets and tax rates for single taxpayers in Monrovia.Refer to Table 18-9. Calculate the income tax paid by Sylvia, a single taxpayer with an income of $70,000.A) $21,000B) $15,740C) $15,400D) $13,475
Q:
An income tax system is ________ if marginal tax rates increase as income increases.
A) progressive
B) regressive
C) efficient
D) equitable
Q:
The marginal tax rate is
A) the amount of taxes paid as a percentage of income.
B) the amount of per-capita taxes paid.
C) the amount of taxes paid as a percentage of gross domestic product (GDP).
D) the fraction of each additional dollar of income that must be paid in taxes.
Q:
When considering changes in tax policy, economists usually focus on
A) the average tax rate.
B) the marginal tax rate.
C) people's willingness to pay taxes.
D) people's ability to pay taxes.
Q:
The average tax rate is calculated as
A) total income divided by the total tax paid.
B) the change in total tax paid divided by the change in income.
C) total tax paid divided by total income.
D) the change in income divided by the change in total tax paid.
Q:
In the United States, the federal income tax is an example of a
A) progressive tax.
B) regressive tax.
C) proportional tax.
D) flat tax.
Q:
Table 18-8Taxable IncomeTax Payments$10,000$1,00012,0001,08016,0001,36022,0001,760Table 18-8 shows the amount of taxes paid on various levels of income.Refer to Table 18-8. The tax system isA) progressive throughout all levels of income.B) proportional throughout all levels of income.C) regressive throughout all levels of income.D) progressive between $10,000 and $12,000 of income and regressive between $12,000 and $22,000.
Q:
According to projections for 2013 by the Tax Policy Center, the 20 percent of U.S. taxpayers who make the highest incomes
A) use loopholes and tax exemptions to reduce their share of federal income taxes to less than 20 percent.
B) pay almost 68 percent of federal income taxes.
C) pay about 92 percent of federal income taxes but only about 20 percent of Social Security and Medicare payroll taxes.
D) pay more in excise and other taxes than they pay in Social Security and Medicare payroll taxes.
Q:
Consider this quote from an article in the Wall Street Journal: "The stock of educated workers isn't increasing fast enough to keep up with rising demand.... Employers are paying the typical four-year college graduate [without graduate school] 75% more than they pay high-school grads. Twenty-five years ago, they were paying 40% more. Employers insist on ever better-educated, skilled workers. "
Source: David Wessel, "Lack of Well-Educated Workers Has Lots of Roots, No Quick Fix," Wall Street Journal, April 19, 2007, Page A2.
Which of the following best explains the rapid increase in the wage differential between college graduates and high school graduates?
A) The demand for college educated workers shifted to the right while the supply of college educated workers shifted to the left.
B) The supply of high-school educated workers shifted to the right faster than the demand for college educated workers shifted to the right.
C) The demand for college educated workers shifted to the right faster than the supply of college educated workers shifted to the right.
D) The demand for high-school educated workers shifted to the left faster than the supply of college educated workers shifted to the right.
Q:
Suppose the following two events occur in the market for elementary school teachers:
a. Overcrowded schools and education budget cuts have discouraged young college students from pursuing careers in teaching.
b. With an increasing birth rate, the number of children entering the elementary school system is expected to increase significantly over the next ten years.
What is likely to happen to the equilibrium wage and quantity of teachers as a result of these two events?
A) The equilibrium quantity and the equilibrium wage of elementary school teachers fall.
B) The equilibrium wage rises and the effect on the equilibrium quantity of elementary school teachers is indeterminate.
C) The equilibrium quantity falls and the effect on the equilibrium wage of elementary school teachers is indeterminate.
D) The equilibrium quantity falls and the equilibrium wage of elementary school teachers rises.
Q:
Suppose the following two events occur in the domestic market for radiologists:
a. Some hospitals are outsourcing some radiology services such as reading x-rays.
b. Some medical schools have closed down their radiology departments as fewer students enroll in this field.
What is likely to happen to the equilibrium wage and quantity of radiologists following these two events?
A) The equilibrium wage and the equilibrium quantity of radiologists rise.
B) The equilibrium wage and the equilibrium quantity of radiologists fall.
C) The equilibrium quantity falls and the effect on the equilibrium wage of radiologists is indeterminate.
D) The equilibrium wage falls and the effect on equilibrium quantity of radiologists is indeterminate.
Q:
Consider the market for pilots. What is likely to happen to the equilibrium wage and quantity of pilots if the government enforces a lower mandatory retirement age, say from age 65 to age 62?
A) The equilibrium wage and the equilibrium quantity of pilots rise.
B) The equilibrium wage and the equilibrium quantity of pilots fall.
C) The equilibrium wage falls and the equilibrium quantity of pilots rises.
D) The equilibrium wage rises and the equilibrium quantity of pilots falls.
Q:
Suppose the government grants child care subsidies to mothers entering the labor force.What is likely to happen to the equilibrium wage and quantity of labor?
A) The equilibrium wage and the equilibrium quantity of labor rise.
B) The equilibrium wage and the equilibrium quantity of labor fall.
C) The equilibrium wage falls and the equilibrium quantity of labor rises.
D) The equilibrium wage rises and the equilibrium quantity of labor falls.
Q:
Consider the market for opticians. What is likely to happen to the equilibrium wage and quantity of opticians if more and more people turn to laser eye surgery instead of wearing glasses or contact lens?
A) The equilibrium wage and the equilibrium quantity of opticians rise.
B) The equilibrium wage and the equilibrium quantity of opticians fall.
C) The equilibrium wage rises and the equilibrium quantity of opticians falls.
D) The equilibrium quantity falls and the equilibrium wage of opticians rises.
Q:
What happens to the equilibrium wage and quantity of labor if output price rises?
A) The equilibrium wage and the equilibrium quantity of labor rise.
B) The equilibrium wage and the equilibrium quantity of labor fall.
C) The equilibrium wage falls and the equilibrium quantity of labor rises.
D) The equilibrium wage rises and the equilibrium quantity of labor falls.
Q:
The equilibrium wage and quantity of labor in the market for skilled workers is determined by
A) the strength of labor unions.
B) the monopsony power of firms.
C) the demand and supply of labor.
D) the market value created by the output of these skilled workers.
Q:
a. What are the two effects of an increase in the wage rate on an individual's labor supply decision? Briefly explain each effect.
b. Explain how a labor supply curve could be backward-bending.
Q:
What is the shape of the labor supply curve implied by the following statements?
a. "I'm sorry, kids, but now that I'm earning more, I just can't afford to come home early in the afternoon, so I won't be here when you get home from school."
b. "They can pay me a lot or they can pay me a little. I'll still put in my 8 hours a day."
c. "Now that I have received a salary increase, I am going to work 36 hours instead of 40 hours a week"
Q:
Suppose that Hawaii legalizes casino gambling. By imposing a tax on casino revenues, the state government is able to eliminate the state income tax on wages. What is likely to be the effect on the labor supply curve in Hawaii?
Q:
Serafina was earning $75 per hour and working 50 hours per week. Serafina's wage rose to $90 per hour, and as a result, she now works 60 hours per week. What can you conclude from this information about the income effect and the substitution effect of a wage change for Serafina?
Q:
What is the substitution effect of a wage increase? What is the income effect of a wage increase? Under what conditions will a worker's labor supply curve become downward sloping?
Q:
What are the three most important variables that cause the market supply curve of labor to shift?
Q:
In many European countries it is much easier than in the United States for unemployed workers to receive generous wage replacement income from their governments.
Q:
Increases in population shift the market supply curve for labor to the right.
Q:
If the income effect of a wage increase equals the substitution effect, the labor supply curve is horizontal at the equilibrium wage.
Q:
The substitution effect of a wage decrease examines the effect of the decrease in wage income on a worker's ability to consume goods and services.
Q:
An increase in wages raises the opportunity cost of leisure and leads to an increase in the quantity supplied of labor.
Q:
The income effect of a wage decrease examines the effect of the decrease in wage income on a worker's ability to purchase goods and services.
Q:
If the substitution effect of a wage increase dominates the income effect, the labor supply curve has a positive slope.
Q:
If the market wage rate increases, a firm's labor demand curve does not shift but the labor supply curve shifts to the right.
Q:
Which of the following factors has significantly increased the supply of labor in the United States since 1950?
A) a large increase in the substitution effect as a result of higher wages
B) a low birth rate and an aging population
C) an increase in the number of people who have received college degrees
D) an increase in the labor force participation rate of women
Q:
In recent years unemployment rates in several European countries have been higher than unemployment rates in the United States. Many economists believe that European unemployment rates have been higher because
A) of the different methods used to measure unemployment. If similar methods were used, unemployment rates in Europe and the United States would be about the same.
B) European firms hire many seasonal workers from other countries, and this tends to inflate unemployment rates in their countries.
C) unemployment benefits are more generous in Europe than in the United States.
D) the size of the military is much higher in the United States and all military personnel are classified as employed.
Q:
Which of the following variables will not cause the market supply curve of labor to shift?
A) increases in population
B) a favorable change in consumer tastes
C) a change in the labor participation rate of women
D) an increase in the number of people between the ages of 16 and 65
Q:
Leisure is
A) an inferior good.
B) a complementary good to labor.
C) wasteful to society.
D) a normal good.
Q:
Along an upward sloping labor supply curve, as the wage rate increases, the opportunity cost of leisure ________, causing individuals to supply a ________ quantity of labor.
A) increases; greater
B) increases; lower
C) decreases; greater
D) remains constant, constant
Q:
The income effect of a wage increase will cause a worker to devote
A) more time to labor and more time to leisure.
B) more time to labor and less time to leisure.
C) less time to labor and more time to leisure.
D) less time to labor and less time to leisure.
Q:
Francis Crawford recently received a 20 percent wage increase and desires to work less. We can conclude that at his current wage his supply of labor curve
A) has a positive slope.
B) has a negative slope.
C) is U-shaped.
D) is vertical.
Q:
For most low-wage earners
A) the income effect of a wage rate increase is likely to be larger than the substitution effect.
B) the substitution effect of a wage rate increase is likely to equal the income effect.
C) the opportunity cost of leisure is high.
D) the substitution effect of a wage rate increase is likely to be larger than the income effect.
Q:
The market supply curve for labor is
A) derived from the market supply curve for the output produced with labor.
B) perfectly inelastic if leisure is an inferior good.
C) determined by adding up the quantity of labor supplied by each worker at each wage, holding constant all other variables that affect the willingness of workers to supply labor.
D) determined by adding up the wages each worker is willing to work for at a given quantity supplied, holding constant all other variables that affect the willingness of workers to supply labor.
Q:
In order for a labor supply curve to be backward bending at high wages
A) leisure must be an inferior good.
B) the substitution effect of a wage increase must be greater than the income effect.
C) workers must have an irrational response to wage increases.
D) the income effect of a wage increase must be greater than the substitution effect.
Q:
Because leisure is a normal good, an increase in the wage rate will result in
A) an increase in the quantity of labor supplied because of both the substitution effect and the income effect.
B) a decrease in the quantity of labor supplied because of the substitution effect and an increase in the quantity of labor supplied because of the income effect.
C) an increase in the quantity of labor supplied because of the substitution effect and a decrease in the quantity of labor supplied because of the income effect.
D) an increase in the quantity of labor supplied because of the substitution effect. At low wages the income effect causes an increase in the quantity of labor supplied, but at high wages the income effect causes a decrease in the quantity of labor supplied as the wage rises.
Q:
The typical labor supply curve is upward-sloping but it is possible for the curve to be backward bending - negatively sloped - at very high wage levels. Which of the following would cause a backward bending supply curve?
A) This would occur when the income effect from an increase in the wage becomes larger than the substitution effect.
B) This would occur when the substitution effect from an increase in the wage becomes larger than the income effect.
C) This would occur if leisure is an inferior good.
D) This would occur when a large number of workers choose leisure rather than employment at low wages; only a very large increase in the wage will lead these workers to prefer employment to leisure.
Q:
Which of the following statements is true?
A) As the wage rate rises, the substitution effect decreases the opportunity cost of leisure and causes a worker to devote more time to working and less time to leisure.
B) As the wage rate rises, the substitution effect increases the opportunity cost of leisure and causes a worker to devote more time to working and less time to leisure.
C) As the wage rate rises, the income effect increases the opportunity cost of leisure and causes a worker to devote more time to working and less time to leisure.
D) As the wage rate rises, the income effect causes a worker to devote more time to work and less time to leisure.
Q:
Which of the following helps to explain why the supply curve of labor is upward sloping?
A) The supply curve of labor is a derived supply curve; since the output supply curve is upward-sloping so is the labor supply curve.
B) As the wage rate rises, the income effect causes the quantity of labor supplied to increase.
C) The substitution effect of a price change makes a good more expensive relative to other goods.
D) As the wage rate rises, the opportunity cost of leisure rises.
Q:
The wage rate is the opportunity cost of
A) working.
B) working overtime.
C) leisure.
D) consumption.
Q:
In general, the labor supply curve
A) slopes downward because firms will hire fewer workers at higher wages.
B) slopes upward because as the wage rises the opportunity cost of leisure increases.
C) is vertical at the equilibrium wage rate.
D) is perfectly elastic at the equilibrium wage rate.
Q:
The labor supply curve
A) shows the relationship between the wage rate and the quantity of labor supplied.
B) shows the quantity of jobs supplied at various wage rates.
C) is unit-elastic.
D) is U-shaped.
Q:
Figure 17-4 Refer to Figure 17-4. Which of the following is true at W2?
A) The income effect is larger than the substitution effect.
B) The substitution effect is larger than the income effect.
C) The income effect and the substitution effect are equal.
D) The supply curve is positively sloped.
Q:
Figure 17-4 Refer to Figure 17-4. Which of the following is true if the wage rate increases from W0 to W1?
A) The income effect is larger than the substitution effect.
B) The substitution effect is larger than the income effect.
C) The income effect and the substitution effect are equal.
D) The supply curve is unit-elastic.
Q:
Figure 17-4 Refer to Figure 17-4. Which of the following is true at W0?
A) The income effect is larger than the substitution effect.
B) The substitution effect is larger than the income effect.
C) The income effect and the substitution effect are equal.
D) The supply curve is positively sloped.
Q:
Figure 17-4 Refer to Figure 17-4. Which of the following is true if the wage rate increases from W1 to W2?
A) The income effect is larger than the substitution effect.
B) The substitution effect is larger than the income effect.
C) The income effect and the substitution effect are equal.
D) The supply curve is unit-elastic.
Q:
Figure 17-3 Refer to Figure 17-3. InPanel A, at high wages (segment iii)
A) the price of leisure is rising relative to the price of labor.
B) the price of leisure is falling relative to the price of labor.
C) laborers work more as wages increase.
D) labor suppliers take more leisure as wages increase.
Q:
Figure 17-3 Refer to Figure 17-3. InPanel A, at low wages (segment i)
A) the substitution effect outweighs the income effect.
B) the income effect outweighs the substitution effect.
C) the substitution effect offsets the income effect.
D) labor suppliers demand more leisure as wages increase.
Q:
Figure 17-3 Refer to Figure 17-3. Panel D is appropriate when used to represent
A) the quantity of labor demanded by an input price taker.
B) the labor supply curve facing an input price taker.
C) the quantity of labor supplied by someone working a fixed number of hours.
D) the highly-skilled labor market supply curve.
Q:
Figure 17-3 Refer to Figure 17-3. Which of the following statements is true?
A) Panel B correctly describes a situation in which the income effect dominates the substitution effect at low wages (segment i) and again at very high wages (segment iii).
B) Panel B incorrectly describes a situation in which the income effect dominates the substitution effect at low wages (segment i) and a situation in which the substitution effect dominates the income effect at very high wages (segment iii).
C) Panel B incorrectly describes a situation in which the income effect dominates the substitution effect at low wages (segment i).
D) Panel B incorrectly describes a situation in which the income effect dominates the substitution effect at very high wages (segment iii)
Q:
Figure 17-3 Refer to Figure 17-3. Which of the panels in the diagram best represents an individual's labor supply curve?
A) Panel A
B) Panel B
C) Panel C
D) Panel D
Q:
The combined effect (both income and substitution) of a wage increase is that
A) the substitution effect always dominates, leading to more work at a higher wage.
B) the income effect always dominates, leading to less work at a higher wage.
C) if the substitution effect outweighs the income effect, the labor supply curve slopes upward, but if the income effect outweighs the substitution effect, the labor supply curve is backward bending.
D) if the substitution effect outweighs the income effect, the labor supply curve is backward bending, but if the income effect outweighs the substitution effect, the labor supply curve slopes upward.
Q:
The income effect of a wage increase is observed when
A) the higher wage income causes workers to take more leisure and work less.
B) leisure's higher opportunity cost causes workers to take less leisure and work more.
C) the higher wage income causes workers to take less leisure and work more.
D) leisure's higher opportunity cost causes workers to take more leisure and work less.
Q:
The substitution effect of a wage increase is observed when
A) the higher wage income causes workers to take more leisure and work less.
B) leisure's higher opportunity cost causes workers to take less leisure and work more.
C) the higher wage income causes workers to take more leisure and work more.
D) leisure's higher opportunity cost causes workers to take more leisure and work less.
Q:
At low wages, the labor supply curve for most people slopes upward because
A) the supply of labor is perfectly inelastic at low wages.
B) as wages increase the opportunity cost of leisure increases.
C) as wages increase income also increases unless hours worked decrease.
D) the demand for labor is perfectly elastic at low wages.
Q:
If Alan Shaw reduces his work hours when his salary increases, then
A) the income effect of his salary increase dominates the substitution effect.
B) the substitution effect of his salary increase dominates the income effect.
C) the income effect of his salary increase is completely offset by the substitution effect.
D) leisure is an inferior good to Alan.
Q:
If Molly Bee increases her work hours when her wage increases, then
A) the income effect of the wage increase outweighs the substitution effect.
B) the substitution effect of the wage increase outweighs the income effect.
C) leisure is an inferior good to Molly.
D) Molly is spending beyond her means.
Q:
Which of the following best explains why unemployment rates are higher in the European economies than in the United States?
A) More Europeans go to school fulltime and are therefore not able to participate in the labor market.
B) Unemployment benefits are more generous in Europe than in the United States.
C) Workers in Europe are less productive than workers in the United States.
D) European industries pay a lower wage rate than industries in the United States.
Q:
All of the following will shift the labor supply curve except
A) an increase in labor force participation rate among women.
B) an increase in the average age of retirement.
C) an increase in the wage rate.
D) a change in a country's immigration policy.
Q:
How will an increase in population affect the labor market?
A) It will shift the market supply curve.
B) It will cause a decrease in the quantity of labor demanded.
C) It will increase the supply of jobs.
D) It will increase the opportunity cost of leisure.
Q:
The labor supply for an industry would decrease if
A) the wage rate falls.
B) the percentage of the population from age 16 to 65 decreases.
C) the government welcomes foreign workers into the country.
D) a greater percentage of women want to work outside the home.
Q:
An individual's labor supply curve shows
A) the maximum wage rates offered to that individual by various potential employers.
B) the relationship between wages and the quantity of labor that she is willing to supply.
C) the relationship between wages and the quantity of labor that a firm is willing to employ.
D) the relationship between the quantity of hours worked and total income earned by that individual.
Q:
Table 17-6Number of HairdressersHaircuts per DayMarginal ProductMarginal Revenue Product18216323429534638Refer to Table 17-6. The Hair Cuttery, a new hair salon, is ready to start hiring. The table above shows the relationship between the number of hairdressers the firm hires and the quantity of haircuts it produces.a. Suppose the price of haircuts is $8. Complete the table by filling in the values for marginal product and marginal revenue product.b. The Hair Cuttery is an input price-taker. Suppose the wage paid to hairdressers is $40 per day. What is the profit-maximizing number of hairdressers?c. Suppose the wage rate rises to $60 per day.(i) What happens to the firm's demand curve for hairdressers?(ii) What happens to the profit-maximizing quantity of hairdressers?d. Suppose the wage rate is $40 per day and the price of haircuts is now $10.(i) What happens to the firm's demand curve for hairdressers?(ii) What happens to the profit-maximizing quantity of hairdressers?
Q:
Table 17-5Number of MechanicsOil Changes per DayMarginal ProductMarginal Revenue Product16212317421524626Refer to Table 17-5. Oil Can Harry's, a new automobile service shop, is ready to start hiring. The table above shows the relationship between the number of mechanics the firm hires and the quantity of oil changes it produces.a. Suppose the price of an oil change is $20. Complete the table by filling in the values for marginal product and marginal revenue product.b. Oil Can Harry's is an input price-taker. Suppose the wage paid to mechanics is $80 per day. What is the profit-maximizing number of mechanics?c. Suppose the wage rate rises to $100 per day.(i) What happens to the firm's demand curve for mechanics?(ii) What happens to the profit-maximizing quantity of mechanics?d. Suppose the wage rate is $60 per day and the price of haircuts is now $15.(i) What happens to the firm's demand curve for mechanics?(ii) What happens to the profit-maximizing quantity of mechanics?
Q:
A firm's labor demand curve is also its marginal revenue product curve. For both the perfectly competitive firm and the output price maker, the labor demand curve slopes downwards. However, there is a difference in the reasons why the labor demand curve slopes downwards. What is this difference?
Q:
Explain how the market for opticians is affected as a result of the development of laser technology which reduces the demand for glasses and contact lenses. In your explanation be sure to show the connection between the market for glasses and contact lenses and the market for opticians.
Q:
The demand for labor is a derived demand. Explain what is meant by the term "derived demand."
Q:
What are the five most important variables that cause the market demand curve for labor to shift?
Q:
An increase in the supply of capital, which is a substitute to labor, will lead to a decrease in the demand for labor.
Q:
A decrease in the amount of human capital acquired by workers will lead to decrease in the supply of labor.
Q:
The marginal product of labor curve is the demand curve for labor.
Q:
An increase in the price of grape juice causes an increase in the marginal revenue product of labor used to produce grape juice.
Q:
A profit-maximizing firm should hire workers up to the point where labor's marginal revenue product equals the wage rate.
Q:
Technological advancements that increase labor's productivity shift the labor supply curve to the right.
Q:
The marginal product of labor is the increase in output as a result of hiring an additional worker while the marginal revenue product of labor is the increase in profit as a result of hiring an additional worker.