If the market for labor is perfectly competitive, the profit maximizing level of labor occurs where
A. MRPL < W (the wage).
B. MRPL = P (the output price).
C. MRPL just exceeds W.
D. MRPL = W.
E. none of the above
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If leisure is a normal good, then the income effect of a decrease in wage will
A. decrease the number of hours worked.
B. increase the number of hours worked.
C. decrease the number of leisure hours.
D. increase the sum of leisure plus hours worked.
The substitution effect of a decrease in the wage will
A. decrease leisure, regardless of whether leisure is a normal or inferior good.
B. increase leisure, regardless of whether leisure is a normal or inferior good.
C. increase leisure only if leisure is a normal good.
D. decrease leisure only if leisure is a normal good.
If an individual's labor supply curve is backward bending, then
A. the income effect associated with a higher wage is greater than the substitution effect.
B. the substitution effect associated with a higher wage is greater than the income effect.
C. the substitution effect associated with a higher wage encourages more leisure.
D. A and C
E. B and C
An increase in technology that enhances labor productivity will likely result in:
A. a decrease in labor employment and an increase in the wage rate.
B. an increase in labor employment and an increase in the wage rate.
C. a decrease in labor employment and a decrease in the wage rate.
D. an increase in labor employment and a decrease in the wage rate.
E. employers using less labor and more capital while the wage effect is unknown.
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