A2 Labour Market

A backward-sloping supply curve of labour is one where, beyond a certain point, the supply of labour

• decreases as the demand for labour rises

• increases as the demand for labour rises

• decreases as wages rise

• increases as wages rise

The diagram shows a backward sloping supply curve of labour.

What is correct about the substitution effect and the income effect when the real wage risesabove OW?

• substitution effect: negative

  income effect:

  negative

• substitution effect: negative

  income effect:

  positive

• substitution effect: positive

  income effect:

  negative

• substitution effect: positive

  income effect:

  positive

A worker responds to an increase in his hourly wage rate by reducing the number of hours heworks per week.

What would explain this?

• The income effect of the wage rate increase outweighs the substitution effect.

• The substitution effect of the wage rate increase outweighs the income effect.

• The worker's supply of labour is wage elastic.

• The worker's supply of labour is wage inelastic.

The diagram shows a perfectly competitive firm's average product of labour and marginal productof labour curves.

The market price of the firm's product is $1.

Which segment of the curves represents the firm's demand for labour curve?

• OJ

• JK

• KL

• KM

The diagram shows a perfectly competitive firm's average product of labour (APL) and marginalproduct of labour(MPL) curves.

The market price of the firm's product is $1.

How many workers will the firm employ at a wage of OW?

• ON1

• ON2

• ON3

• ON4

To increase its labour force from 30 to 31 workers, a firm has to increase the daily wage rate from$50 to $52.

What is the marginal cost of labour per day?

• 52

• 62

• 112

• 1612

In the diagram D1 and S are the initial demand and supply curves for building workers.

If the demand for building workers increases to D, by how much does the economic rent earnedby building workers rise?

• RZU

• TXZU

• VWZX

• XZY

In the diagram, MRP is a firm's marginal revenue product of labour supply curve. S is its supply of labour curve, and MC its marginal cost of labour curve.

Assuming profit maximisation, how many workers will the firm employ and what wage wil it pay?

• number employed:

  N1

  Wage:

  W1

• number employed:

  N1

  Wage:

  W3

• number employed:

  N2

  Wage:

  W2

• number employed:

  N2

  Wage:

  W4

A firm currently employs 30 workers at a daily wage of $50. The marginal cost of employing one extra worker is $112 per day.

By how much will the firm have to increase the daily wage in order to increase its labour forcefrom 30 to 31 workers?

• 2%

• 4%

• 6.3%

• 7.5%

What could cause a perfectly competitive firm's marginal revenue product of labour curve to shifto the right?

• an increase in wages

• a higher rate of sales tax

• an increase in labour supply

• a rise in the price of the final product