11.2 The Supply of Labor: Your Labor-Leisure Trade-off
1) Non-paying activities in economics are referred to as:
A) relief.
B) leisure.
C) free-time.
D) unemployment.
2) The price of non-work activities is:
A) zero.
B) equal to the opportunity cost of those activities.
C) less than the opportunity cost of those activities.
D) greater than the opportunity cost of those activities.
3) The condition to decide on the optimal amount of leisure is that:
A) the average benefit of leisure should be equal to zero.
B) the total benefit of leisure should be equal to the wage rate.
C) the average benefit of leisure should be equal to the wage rate.
D) the marginal benefit of leisure should be equal to the wage rate.
4) The market supply curve of labor in a perfectly competitive labor market:
A) is horizontal or perfectly elastic.
B) is vertical or perfectly inelastic.
C) can be derived by vertically adding the individual supply curves of labor.
D) can be derived by horizontally adding the individual supply curves of labor.
Suppose the market for labor consists of only three workers—Alex, Anna, and Jim. The following table shows the labor supplied by the three workers at different wage rates.
Wage Rate ($)
Labor Supplied by Alex (hours per week)
Labor Supplied by Anna (hours per week)
Labor Supplied by Jim (hours per week)
50
12
15
23
75
24
28
42
100
35
40
–
5) Refer to the table above. What is the market supply of labor per week when the wage rate is $50?
A) 12 hours
B) 30 hours
C) 50 hours
D) 71 hours
6) Refer to the table above. What is the market supply of labor per week when the wage rate is $75?
A) 28 hours
B) 50 hours
C) 71 hours
D) 94 hours
7) Refer to the table above. If the market supply of labor per week when the wage rate is $100 is 125 hours, labor supplied by Jim per month at the wage rate is:
A) 12 hours.
B) 30 hours.
C) 50 hours.
D) 75 hours.
8) In case of leisure, the substitution effect implies that:
A) when the price of leisure increases, people will work more.
B) when the price of leisure increases, people will work less and relax more.
C) if people tend to work more and relax less, the price of leisure increases.
D) if people tend to work more and relax less, the price of leisure decreases.
9) As the income of an individual increases, he can afford more leisure. This refers to the ________ of a wage increase.
A) income effect
B) substitution effect
C) transformation effect
D) opportunity cost effect
10) Which of the following statements is true?
A) The slope of the labor supply curve depends only on the income effect of a wage rate change.
B) The income effect and the substitution effect of a wage rate change work in the same direction.
C) The income effect and the substitution effect of a wage rate change work in opposite directions.
D) The slope of the labor supply curve depends only on the substitution effect of a wage rate change.
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