Question

1. Which of the following is correct?

A.Any event that changes the supply or demand for labor must change the value of the marginal product.

B.A profit-maximizing firm hires workers so long as the wage rate exceeds the value of the marginal product of labor.

C.An increase in the supply of labor increases both employment and wages.

D. A decrease in the demand for labor decreases wages but increases employment.

2. Suppose that the market for labor is initially in equilibrium. A decrease in the price of output will cause the equilibrium wage

A.and the equilibrium quantity of labor to rise.

B. and the equilibrium quantity of labor to fall.

C. to rise and the equilibrium quantity of labor to fall.

D. to fall and the equilibrium quantity of labor to rise.

3. Consider the labor market for computer programmers. Because of the dot.com boom in the late 1990s, a lot of workers went to school to learn how to write computer code for one of thousands of new dot.com companies. However, when these computer programming students graduated the dot.com bust took place. The dot.com bust decreased the value of the marginal product of computer programmers. Holding all else equal what effect did these two circumstances have on the equilibrium quantity in the labor market for computer programmers?

A. The equilibrium quantity of labor increased.

B. The equilibrium quantity of labor decreased.

C. The equilibrium quantity of labor did not change.

D. It is not possible to determine what happens to the equilibrium quantity of labor.

4. Consider the labor market for computer programmers. Because of the dot.com boom in the late 1990s, a lot of workers went to school to learn how to write computer code for one of thousands of new dot.com companies. However, when these computer programming students graduated, the dot.com bust took place. The dot.com bust decreased the value of the marginal product of computer programmers. Holding all else equal, what effect did these two circumstances have on the equilibrium wage in the labor market for computer programmers?

A. The equilibrium wage increased.

B. The equilibrium wage decreased.

C.The equilibrium wage did not change.

D. It is not possible to determine what happens to the equilibrium wage.

Answer 1

1. a. Any event that changes the supply or demand for labor must change the value of the marginal product
(Changes in supply and demand changes VMP.)

2. b. and the equilibrium quantity of labor to fall.
(Demand for labor will decline which will decrease wage and labor employment.)

3. d. It is not possible to determine what happens to the equilibrium quantity of labor.
(There is increase in supply of labor which increases equilibrium quantity and decrease in demand for labor which decreases equilibrium quantity. So, it is not possible to determine the final impact.)

4. b. The equilibrium wage decreased.
(Increase insupply and decrease in demand both decrease the equilibrium wage.)