1. The supply of labour to an industry is generally upward sloping because: a. W
ID: 1118427 • Letter: 1
Question
1. The supply of labour to an industry is generally upward sloping because:
a. Workers are more willing to work when there are incentives in the form of higher wages.
b. It is more profitable for firms to hire more workers when labour is cheap.
c. The substitution effect and the scale effect of a wage change work in the same direction.
d. There are many workers working for an industry.
2. Both the utility levels of workers (on the supply side of the market) and the profit levels of firms (on the demand side of the market) are maximized when:
a. the labour market is in a state of equilibrium and the labour market is competitive.
b. there is effective government intervention.
c. the firm has monopsony power.
d. the workers are unionized.
3. Which of the following statements about a payroll tax is true?
a. It generally reduces the quantity demanded of workers.
b. It is borne entirely by workers if the supply of labour is perfectly elastic.
c. It reduces the quantity demanded of workers if the supply of labour is perfectly inelastic.
d. It is typically shared equally between workers and employers.
4. Which of the following statements is true? The burden of a payroll tax is paid:
a. by workers if the supply of labour is perfectly elastic.
b. by workers if the demand for labour is perfectly inelastic.
c. by both workers and firms if the elasticities of demand and supply of labour are between zero and infinity.
d. by firms if they are legally responsible for remitting the tax to the government.
5. Which of the following statements is true in regarding to the marginal cost of labour?
a. is derived from the marginal revenue product curve.
b. shows the increase in revenue received by the firm if it hires one more worker.
c. is equal to the wage paid if the firm is a monopsonist.
d. is the same as the supply curve of labour for a monopsonist.
Explanation / Answer
1> a. Workers are more willing to work when there are incentives in the form of higher wages.
Reason
More payment incentivizes workers to work hard or more workers to join the market.
2> b. there is effective government intervention.
Reason
A proper government intervention can root out efficiencies and may lead to the best outcome for all.
3> a. It generally reduces the quantity demanded of workers.
Reason
Taxation reduces the disposable income and disincentivizes workers to work.
4> b. by workers if the demand for labour is perfectly inelastic.
Reason
The inelastic side of the market always pays the higher amount of the burden.
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