#1
How does the substitution effect influence the demand for labor when the wage rate increases?
It increases the demand for labor
ExplanationHigher wages lead to greater demand for labor due to substitution effect.
#2
How does the 'income effect' influence the quantity of labor supplied when wages increase?
It leads to a decrease in labor supply
ExplanationHigher wages can lead to a reduction in the quantity of labor supplied due to income effect.
#3
According to the 'reservation wage' concept, what happens if the offered wage is below the worker's reservation wage?
The worker rejects the job
ExplanationWorkers decline job offers if wages fall below their reservation wage.
#4
According to the 'income effect' in labor economics, how does an increase in wages affect the quantity of labor demanded by a firm?
It increases the demand for labor
ExplanationHigher wages boost labor demand according to the income effect.
#5
How does the 'income effect' influence the quantity of labor demanded when wages increase?
It leads to a decrease in labor demand
ExplanationRising wages can decrease labor demand due to the income effect.
#6
In microeconomics, what does the term 'marginal revenue product' refer to?
The additional revenue generated by one more unit of input
ExplanationMeasures the added revenue from employing an additional unit of input.
#7
What is the primary determinant of a worker's wage in a competitive labor market, according to neoclassical economics?
Individual productivity
ExplanationWages determined by the worker's contribution to production in a competitive labor market.
#8
What is the 'efficiency wage theory' in labor economics?
The notion that paying higher wages can increase worker productivity and reduce turnover
ExplanationHigher wages improve worker performance and decrease turnover.
#9
According to the human capital theory, what factors contribute to an individual's earning potential?
The level of education, training, and skills acquired
ExplanationEarning potential influenced by education, training, and acquired skills.
#10
What is the primary assumption of the 'leisure-labor tradeoff' model in labor economics?
Workers prefer leisure over work
ExplanationModel assumes workers prioritize leisure over work.
#11
What is the elasticity of resource demand?
A measure of how much the quantity demanded of a resource responds to a change in price
ExplanationQuantifies the responsiveness of resource demand to price changes.
#12
In the context of labor markets, what does the term 'reservation wage' represent?
The wage at which a worker is indifferent between working and not working
ExplanationThe wage where a worker is undecided between accepting a job or staying unemployed.
#13
What is the main assumption behind the concept of a 'perfectly competitive labor market'?
Workers have perfect information about job opportunities and wages
ExplanationAssumes workers have complete information on jobs and wages in the market.
#14
What is the role of 'monopsony' in labor markets?
A market with a single dominant buyer
ExplanationLabor market with a sole powerful buyer.
#15
What is the primary goal of a minimum wage policy?
To ensure a fair distribution of income
ExplanationMinimum wage policy aims to achieve a fair income distribution.