Question

Suppose the manufacturing labor market, which is nonunionized, is in equilibrium at a wage equal to $25. Suppose now that the AFL-CIO (a labor organization) organizes the workers in the manufacturing market and negotiates a wage of $30 per hour. After the workers become unionized, how many workers do manufacturing firms collectively hire?

160 workers
	200 workers
	240 workers
	There is not enough information to determine the number of workers.

After an employer pays the cost of educating a worker, the

Question 3 options:

	worker has a lower level of human capital.
	worker should become less productive.
	worker's value of the marginal product should decrease.
	worker might look for another job unless his employer pays him more

Assuming that all other things are equal, including the wage, which of the following statements is correct?

Question 2 options:

	The quantity of labor supplied for difficult jobs exceeds that for easy jobs.
	The quantity of labor supplied for fun jobs exceeds that for dull jobs.
	The quantity of labor supplied for dangerous jobs exceeds that for safe jobs.
	The quantity of labor supplied for dirty, outdoor jobs exceeds that for jobs in clean environments.

Wages of doctors tend to be higher than wages of bankers. Which of the following is not a compensating differential explaining the difference in wages?

Question 1 options:

	Doctors have the stress of being responsible for other peoples' lives, whereas bankers do not.
	Doctors are on call to work nights and weekends, whereas bankers work traditional business hours.
	Doctors must pay for malpractice insurance in case they are sued for a mistake on the job.
	Doctors have to pay hundreds of thousands of dollars for medical school in order to learn the necessary skills to become a doctor.

Answer 1

1.(c) There is not enough information to determine the number of workers.

After the workers become unionized, the number of workers hired by manufacturing firms will decrease. This is because as the wage increases from $25 to $30, the labor supplied will increase but labor demanded will decrease. Thus equilibrium level of labor employed will decrease. But we do not have enough information to determine this decrease.

2. (d) worker might look for another job unless his employer pays him more.

After an employer pays the cost of educating a worker, the human capital, productivity and margina product of the worker increases. Due to improvement in skills, the worker has an incentive to switch to a higher paying job if the employed does not increase his wages.

3. (b) the quantity of labor supplied for fun jobs exceeds that for dull jobs.

All other options are written in reverse. That is, the quantity of labor supplied for easy, safe, cleaner jobs is more than difficult, dangerous and dirty jobs.

4. (a) doctors have the stress of being responsible for other peoples' lives, whereas bankers do not.

All other options are legitimate reasons that explain the compensating differential in the difference in wages.