Question

1. What happens to labor when there is a change from shovel to backhoe ?

a. increase in labor demand

b. increase in labor supply

c. decrease in labor demand

d. decrease in labor supply

2. A set of "reservation wages" corresponds to _________.

a. labor demand

b. labor supply

c. marginal cost of hiring

d. none of the above

3. What is the firm's estimation of workers' marginal product relative to the wage.

a. labor demand

b. labor supply

c. marginal cost of hiring

d. none of the above

4. Suppose that capital increases.

   Labor demand ______, when capital & labor are _________.

a. increases, subsitutes.

b. increases, complements.

c. decreases, subsitutes.

d. decreases, complements.

5. Assume that labor market is perfectly competitive.

When the minimum wage is set above the equilibrium wage, there exists __________.

a. voluntary employment

b. voluntary unemployment

c. involuntary employment

d. involuntary unemployment

Answer 1

a) technological improvement will cause a "decrease in labor demand" the answer is "C".

b) "B" reservation wages is the lowest that the person is willing to take to provide the service.it will be related to the labor supply.

c) "A"

the labor demand, if the marginal productivity is more then the labor demand will be more and if it declines then the labor demand will fall.

d) "B"

the labor demand will increase if the labor and capital are complementary to each other.

e) "D"

If the wages are above the equilibrium wage there exist involuntary unemployment.