Wage Quantity of Labor Rate Demanded
$16 800
14 1,000
12 1,200
10 1,600
8 1,800
Refer to the given data. Suppose that the union that provides labor to firms in this market successfully negotiates an increase in the wage rate from $10 to $12. As a result of the wage increase, firms will hire:.
a. fewer workers and the total paid out for wages will decline.
b. fewer workers, but the total paid out for wages will increase.
c. fewer workers, but the total paid out for wages will remain unchanged.
d. more capital, if capital and labor are used in fixed proportions in production.
2. If the price of capital declines, the consequent output effect would be:.
a. greater, the more elastic the demand for the product.
b. greater, the less elastic the demand for the product.
c. negative.
d. of consequence only if capital and labor are used in fixed proportions.
3. Which of the following describes the equilibrium condition in a purely competitive labor market?
A. MRP = Wage Rate.
B. MRP > Wage Rate.
C. Wage Rate > MRC.
D. Wage Rate < MRC.
4. Suppose all workers are identical, but working for Ajax is more pleasant than working for Acme. In all other nonwage aspects the two firms offer the same job characteristics. We would expect:.
a. wage rates at Ajax to be higher than at Acme.
b. wage rates at Ajax to be lower than at Acme.
c. wage rates at Ajax and Acme to be the same.
d. workers at Ajax would have to be monitored more closely than at Acme.

1. a. fewer workers and the total paid out for wages will decline.

Were wages to rise, producers would seek to reduce their input costs to maintain Profitability and so they will hire less people which will result in them paying out less wages.

2. a. greater, the more elastic the demand for the product.

If the price of capital reduces, producers will want to produce more goods as it is cheaper to do so. They will produce more goods as opposed to less if the Elasticity of the good is high so that they will take advantage of the price that the consumers feel comfortable with and sell more.

3. A. MRP = Wage Rate.

Marginal Revenue Productivity should be equal to the Wage Rate in a purely competitive labor market because it shows that the maximum amount is labor is being employed. What this Equilibrium means is that the Incremental amount that the worker is bringing in by working is equal to their wage rate. Any point after this would.mean that the Worker is being overpaid because they are not bringing in enough to justify what they are paid. For points below this point, the reverse is true.

4. b. wage rates at Ajax to be lower than at Acme.

As working for Ajax is more pleasant, people will prefer to work there over Acme. In order for Acme to compensate employees for staying in a place that is not as pleasant, they will have to pay them more so Acme will be paying more than Ajax.

the correct answer is economics is a game without winners or losers.

unlike sports or games economic is a game without losers or winner rather it is a game where everyone wins. parties of business doing businesses exchange money with each other and hence exchange is done on the basis of goods. one party takes the goods and other sales it so there is winner on both sides. each party values more highly the good it gets than the good it gives up. both sides exchange only because both intend to increase their value. so there is no concept of lose or win.

the answer is a.

by: nicholas dooley