The Equilibrium Wage and Quantity of Labor in the Market

question 91

Multiple Choice

The equilibrium wage and quantity of labor in the market for skilled workers is determined by

• A)the strength of labor unions.
• B)the monopsony power of firms.
• C)the demand and supply of labor.
• D)the market value created by the output of these skilled workers.

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Definitions:

Financial Leverage

The use of borrowed funds with a fixed cost to enhance the potential return on investment.

Bankruptcy Risk

The risk that a company will be unable to meet its financial obligations and thus may have to declare bankruptcy.

Operating Leverage

A measure of how sensitive a company's operating income is to a change in revenue, indicating the level of fixed versus variable costs.

Financial Leverage

The use of borrowed money to increase the potential return of an investment, which also increases the risk of loss.