Question

QUESTION 19

1. Firms will tend to slowly transition to a new employment level in response to changing wages when there are:

   	A.	primarily variable adjustment costs.
   	B.	primarily fixed adjustment costs.
   	C.	no adjustment costs.
   	D.	no government regulations.

QUESTION 20

1. Affirmative action laws may cause costs to rise for nondiscriminatory firms if:

   	A.	underrepresented groups of workers have less human capital than the overrepresented groups of workers.
   	B.	underrepresented groups of workers have more human capital than the overrepresented groups of workers.
   	C.	all workers are equally productive.
   	D.	None of the above is correct.

QUESTION 21

1. Producer surplus from hiring labor will increase when:

   	A.	the MP of labor declines.
   	B.	the price of the product declines.
   	C.	the wage rate declines
   	D.	market labor supply falls.

QUESTION 22

1. Which of the following statements concerning producer and worker surplus is correct?

   	A.	The sum of worker and producer surplus is maximized at the competitive equilibrium level of wages and employment.
   	B.	A payroll tax will increase producer surplus and reduce worker surplus.
   	C.	An increase in the wage will increase producer surplus.
   	D.	A decrease in the wage will increase worker surplus.

QUESTION 23

1. When workers migrate from low-wage to high-wage geographical areas, economic efficiency:

   	A.	rises.
   	B.	falls.
   	C.	remains unchanged.
   	D.	changes in an unpredictable manner.

QUESTION 24

1. The MC_E exceeds the wage for a monopsony firm:

   	A.	because the government imposes higher costs on monopsony firms.
   	B.	the firm is the only seller of the good.
   	C.	because the monopsony firm faces an upward sloping demand curve for its product.
   	D.	the labor supply curve facing the monopsonist is upward sloping.

Answer 1

19) Adjustment costs include hiring and firing costs. If the adjustment costs are higher, firms tend to be slower in adjusting employment levels to changing wages. No adjustment cost would have led to an immediate adjustment of employment levels. Therefore, option a) primarily variable adjustment costs is the correct answer.

20) Affirmative action policies are used to improve the inequality in the society by providing opportunities for the minority groups (including minority races, genders, and sexual orientations) that are commonly and historically discriminated against. For a nondiscriminatory firm, affirmative action policies can prove to be costly if underrepresented groups of workers have less human capital than the overrepresented groups of workers. The firm will become less productive. Therefore, option a) is correct.

21) The producer surplus is what the producer gets after what he is willing to accept less the amount he actually gets. If the wage rate declines, the production cost decreases. Thus, the producer surplus increase. Therefore, option c) is correct.

22) At the competitive equilibrium level of wages and employment, the welfare of both the workers and producers is market-determined. Acted by their own interest, this is the best possible solution in an undistorted market. Therefore, option a) is correct.

23) If workers migrate from low-wage to high-wage geographical areas, the economic efficiency depends on various factors such as skills of the workers (whether high or low skilled), demand in the high-wage area, and so on. Therefore, the ultimate effect is unpredictable. Therefore, option d) is correct.

24) The monopsonist firm is the sole employer of labour and faces the upward sloping labour curve representing the workers who are available to work. Therefore, option d) is correct.