Chapter 21 — Quiz

Multiple choice

Q1. MRPL stands for: a) Maximum Revenue Per Laborer b) Marginal Revenue Product of Labor (MPL × Price of Output) c) Marginal Return on Productive Labor d) Minimum Required Pay Level

Q2. The labor demand curve slopes downward because of: a) The income effect b) Diminishing marginal product of labor c) Backward-bending supply d) Monopsony power

Q3. The work-leisure tradeoff determines: a) Labor demand b) Labor supply c) The price of output d) The number of firms in the market

Q4. Human capital includes: a) Physical machinery b) Education, training, and experience that make a worker more productive c) The firm's financial capital d) Land and buildings

Q5. A compensating differential is: a) The difference between two firms' profits b) A wage premium for dangerous, unpleasant, or inconvenient work c) The minimum wage d) The difference between nominal and real wages

Q6. Monopsony means: a) Many buyers of labor b) One (or few) dominant buyer(s) of labor, with wage-setting power c) Many sellers of labor d) A perfectly competitive labor market

Q7. In a monopsony, a moderate minimum wage can: a) Only reduce employment b) Actually INCREASE employment by pushing wages toward the competitive level c) Have no effect d) Eliminate the firm

Q8. The empirical elasticity of labor demand for low-wage workers is approximately: a) −2 to −3 b) −0.1 to −0.4 c) 0 d) +1

Q9. Gig workers are typically classified as: a) Employees with full benefits b) Independent contractors with no benefits or labor protections c) Part-time employees d) Government workers

Q10. The "polarization" of the labor market means: a) Jobs are moving overseas b) Job growth at the top and bottom of the wage distribution, with hollowing of the middle c) All jobs are being automated d) Wages are converging

Q11. The honest assessment of AI and automation is: a) Mass unemployment is certain b) Nobody knows; historical pattern says jobs adapt, but AI's broader capabilities create more uncertainty c) AI will not affect employment at all d) Only manufacturing jobs are at risk

Q12. The minimum wage works best as: a) A standalone solution to poverty b) A complement to other policies (EITC, education, training) c) A replacement for all other social programs d) A way to eliminate unemployment

Short answer

SA1. Why does a monopsony employer pay below the competitive wage?

SA2. How can a minimum wage increase employment in a monopsony? Walk through the logic.

SA3. Name the four explanations for why wages differ across workers.

SA4. What is the gig economy, and what is the central regulatory debate?

SA5. Why might AI's impact on the labor market be different from previous technologies?

True / False

TF1. In a competitive labor market, workers are paid their MRPL. (True / False)

TF2. Monopsony is common in low-wage labor markets. (True / False)

TF3. The empirical literature shows that moderate minimum wage increases cause large employment losses. (True / False)

TF4. A backward-bending labor supply curve occurs when the income effect dominates the substitution effect at high wages. (True / False)

TF5. The gig economy debate is resolved — all gig workers have been reclassified as employees. (True / False)

Selected answers in appendices/answers-to-selected.md.