Microeconomics: the Labour Market | OCR A-Level Economics (H460)
Microeconomics: the Labour Market
- 75 questions
- 7 subtopics
- Component 01: Microeconomics
- Component 01 and Component 03
The Labour Market is examined on component 01 of OCR Economics, Microeconomics.
75 recall questions across 7 subtopics.
Sample questions from Microeconomics: the Labour Market
Answer each one closed book first, then open the answer.
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Derived demand for labour and wage elasticity of demand
Why does a rise in labour productivity raise the demand for labour at a given wage?
Show the answer
Each worker now adds more output and so more revenue, which raises marginal revenue product and makes it profitable to employ more workers at the same wage. -
Derived demand for labour and wage elasticity of demand
Why is the demand for labour more wage-elastic when wages make up a large share of a firm's total costs?
Show the answer
A given wage rise then raises total costs and prices sharply, so sales and therefore employment fall by a large proportion. -
Labour productivity, unit labour costs and marginal revenue product
Why do rising unit labour costs damage a country's international competitiveness?
Show the answer
Domestic goods become dearer relative to foreign rivals, so exports fall and imports rise sharply. -
Labour productivity, unit labour costs and marginal revenue product
Describe the shape of the marginal revenue product curve and explain why it takes that shape.
Show the answer
It eventually falls from left to right, because as more workers share a fixed stock of capital diminishing marginal returns set in, so marginal physical product and hence marginal revenue product decline. -
Supply of labour and wage elasticity of supply
An occupation removes a costly licensing requirement for new entrants. What happens to the supply of labour to it?
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Supply increases and the supply curve shifts to the right, because the barrier to entering the occupation has been lowered. -
Supply of labour and wage elasticity of supply
An 8% rise in the wage rate increases the quantity of labour supplied to an industry by 12%. Calculate the wage elasticity of supply and interpret it.
Show the answer
Wage elasticity of supply is 12 ÷ 8 = 1.5, which is elastic because it exceeds 1, so labour supplied rises proportionately more than the wage. -
Short and long run labour supply, transfer earnings and economic rent
Define economic rent.
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Economic rent is any payment to a factor of production above its transfer earnings, a surplus over the amount needed to keep it in that use. -
Short and long run labour supply, transfer earnings and economic rent
What is the split between economic rent and transfer earnings when the supply of labour is perfectly wage-inelastic?
Show the answer
The supply curve is vertical, so transfer earnings are zero and the whole of earnings is economic rent, since the workers would stay in the occupation at any wage.
The 7 subtopics
One subtopic is one session. Work down the list.
| Subtopic | What it covers | Questions |
|---|---|---|
| Derived demand for labour and wage elasticity of demand | Recall questions on labour as a derived demand, factors that shift labour demand, wage elasticity of demand for labour, its determinants, and calculating it. | 11 |
| Labour productivity, unit labour costs and marginal revenue product | Recall questions on labour productivity and unit labour cost calculations, competitiveness, and marginal revenue product theory as the firm's demand curve for labour with its limitations. | 15 |
| Supply of labour and wage elasticity of supply | Recall questions on influences on the supply of labour, net advantages, the individual's hours decision, and calculating and explaining wage elasticity of supply. | 11 |
| Short and long run labour supply, transfer earnings and economic rent | Recall questions on short and long run labour supply, transfer earnings and economic rent with calculations and diagrams, and why elite footballers earn large economic rent. | 12 |
| Wage differentials, labour mobility and monopsony | Recall questions on wage differentials and compensating differentials, imperfect information, geographical and occupational mobility of labour, and how monopsony sets wages and employment. | 8 |
| Trade unions, bilateral monopoly and the effects of monopsony | Recall questions on the monopsonist's supply curve, how trade unions raise wages and affect jobs and efficiency, bilateral monopoly, and the consequences of monopsony employers. | 10 |
| Wage determination in a competitive labour market and labour market flexibility | Recall questions on the competitive labour market diagram and equilibrium wage, shifts in demand for and supply of labour, and the benefits and costs of labour market flexibility. | 8 |
How the guide is worked
Answering a question from memory stores it far better than reading the answer again. The guide runs that as a fixed procedure on one subtopic at a time, about twenty minutes a session.
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Step 1 · Closed book
Cover the answers. Work through one subtopic and write down what you can. Leave blanks where you have nothing.
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Step 2 · Open book
Go back to the top. Read each printed answer and write it out in full, including the ones you had right.
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Step 3 · Closed book again
Same questions, same order, from memory. The gap between pass one and pass three is the session result.
Read the full method, the return schedule and the research behind it.
Nearby topics
OCR A-Level Economics Active Recall Guide
Every topic, not just this one. 1,226 questions with their answers.