Question 1

The marginal revenue product of an input tends to decrease as:

Accepted Answer

A)  the price of output increases. 
B)  more of the input is used. 
C)  the price of the input decreases. 
D)  productivity increases. 
A)  the price of output increases. 
B)  more of the input is used. 
C)  the price of the input decreases. 
D)  productivity increases. B

Question 2

Two members of the Kenyan parliament from coffee-growing areas said that no firm should have a monopoly to market Kenyan coffee. The retail coffee company Tetu Coffee has sparked a storm in the industry by promising to earn the country Sh400 billion annually if given exclusive licenses to market Kenyan coffee. The members of parliament said the coffee bean farmers should be free to sell their beans to the highest bidder. Are the farmers in Kenya justified in being upset with having a single coffee buyer?

Accepted Answer

A)  Maybe; the single buyer may reduce quantity but also raise price of coffee beans. 
B)  Maybe; the single buyer may reduce price but also will raise the quantity of coffee beans. 
C)  No; the single buyer will increase the price and quantity of coffee beans. 
D)  Yes; the single buyer will reduce both the quantity and price of coffee beans. 
A)  Maybe; the single buyer may reduce quantity but also raise price of coffee beans. 
B)  Maybe; the single buyer may reduce price but also will raise the quantity of coffee beans. 
C)  No; the single buyer will increase the price and quantity of coffee beans. 
D)  Yes; the single buyer will reduce both the quantity and price of coffee beans. D

Question 3

Institutional discrimination exists when:

Accepted Answer

A)  discrimination is based on individual characteristics related to job performance. 
B)  discrimination is based on individual characteristics not related to job performance. 
C)  the structure of a job makes it difficult for certain groups of individuals to succeed. 
D)  discrimination is based on correctly perceived statistical characteristics of a group. 
A)  discrimination is based on individual characteristics related to job performance. 
B)  discrimination is based on individual characteristics not related to job performance. 
C)  the structure of a job makes it difficult for certain groups of individuals to succeed. 
D)  discrimination is based on correctly perceived statistical characteristics of a group. C

Question 4

A decrease in the wages of truck drivers might be explained by which of the following factors?

Accepted Answer

A)  An increase in the price of gasoline 
B)  An increase in competition within the trucking industry 
C)  An increase in the demand for transportation 
D)  An increase in the cost of air freight 
A)  An increase in the price of gasoline 
B)  An increase in competition within the trucking industry 
C)  An increase in the demand for transportation 
D)  An increase in the cost of air freight

Question 5

Researchers have found that the income of obese women is about 17 percent lower than that of women who are of the recommended weight. This result implies that:

Accepted Answer

A)  the relationship between obesity and income is accidental. 
B)  obese women earn less because they are less productive. 
C)  obese women earn less because employers discriminate against them. 
D)  obese women earn less either because they are less productive or because employers discriminate against them. 
A)  the relationship between obesity and income is accidental. 
B)  obese women earn less because they are less productive. 
C)  obese women earn less because employers discriminate against them. 
D)  obese women earn less either because they are less productive or because employers discriminate against them.

Question 6

If a single union supplies all the labor in a competitive labor market, the union probably will:

Accepted Answer

A)  increase labor supply to raise employment. 
B)  restrict labor supply to raise wages. 
C)  increase union membership to increase wages. 
D)  behave as a monopsonist. 
A)  increase labor supply to raise employment. 
B)  restrict labor supply to raise wages. 
C)  increase union membership to increase wages. 
D)  behave as a monopsonist.

Question 7

Discrimination based on characteristics that are related to job performance may be in the economic best interests of a firm.

Accepted Answer

A) True 
 B)False

Question 8

A monopsonist facing many suppliers of labor will employ:

Accepted Answer

A)  fewer workers than a firm operating in a perfectly competitive labor market. 
B)  the same number of workers as a firm operating in a perfectly competitive labor market. 
C)  more workers than a firm operating in a perfectly competitive labor market. 
D)  an indeterminate number of workers. 
A)  fewer workers than a firm operating in a perfectly competitive labor market. 
B)  the same number of workers as a firm operating in a perfectly competitive labor market. 
C)  more workers than a firm operating in a perfectly competitive labor market. 
D)  an indeterminate number of workers.

Question 9

Which of the following will shift the labor demand curve to the right?

Accepted Answer

A)  An increase in the price of a competing, substitute input 
B)  A reduction in the demand for the output produced by labor 
C)  A reduction in the wage rate 
D)  An increase in the use of factory automation 
A)  An increase in the price of a competing, substitute input 
B)  A reduction in the demand for the output produced by labor 
C)  A reduction in the wage rate 
D)  An increase in the use of factory automation

Question 10

The demand for labor is derived from the demand for output.

Accepted Answer

A) True 
 B)False

Question 11

The Chicago City Council considered a "living wage" ordinance that would raise the minimum wage in Chicago to about $10 an hour. How did most economists probably view this legislation?

Accepted Answer

A)  It is a proposal that is meant to help everyone. 
B)  The city will benefit because more people will move to Chicago. 
C)  All people looking for work will be helped, but consumers will be hurt. 
D)  Workers who can find work will be helped, but some people will lose their jobs. 
A)  It is a proposal that is meant to help everyone. 
B)  The city will benefit because more people will move to Chicago. 
C)  All people looking for work will be helped, but consumers will be hurt. 
D)  Workers who can find work will be helped, but some people will lose their jobs.

Question 12

The price of apples is currently $1 per pound. If apples are sold in a competitive market and the price of apples increases to $2 per pound, the marginal revenue product (MRP) of labor used to produce apples would:

Accepted Answer

A)  not change. 
B)  change in a manner that cannot be determined without additional information. 
C)  be cut in half. 
D)  double. 
A)  not change. 
B)  change in a manner that cannot be determined without additional information. 
C)  be cut in half. 
D)  double.

Question 13

Supply and demand analysis can explain:

Accepted Answer

A)  how much rent will accrue to a landholder and the initial set of property rights. 
B)  how much rent will accrue to a landholder but not the initial set of property rights. 
C)  the initial set of property rights but not how much rent will accrue to a landholder. 
D)  neither the initial set of property rights nor how much rent will accrue to a landholder. 
A)  how much rent will accrue to a landholder and the initial set of property rights. 
B)  how much rent will accrue to a landholder but not the initial set of property rights. 
C)  the initial set of property rights but not how much rent will accrue to a landholder. 
D)  neither the initial set of property rights nor how much rent will accrue to a landholder.

Question 14

Which of the following does Luddite reasoning get correct?

Accepted Answer

A)  Historically, the demand for labor has actually increased as technology has advanced. 
B)  Labor is necessary for building and maintaining machines, and so increased demand for machines increases the demand for labor. 
C)  New technology tends to raise total output, leading to an increase in the demand for labor. 
D)  New technology frequently causes some specialized labor skills to become obsolete. 
A)  Historically, the demand for labor has actually increased as technology has advanced. 
B)  Labor is necessary for building and maintaining machines, and so increased demand for machines increases the demand for labor. 
C)  New technology tends to raise total output, leading to an increase in the demand for labor. 
D)  New technology frequently causes some specialized labor skills to become obsolete.

Question 15

Suppose wages increase but employment decreases. These changes most likely were caused by:

Accepted Answer

A)  an increase in labor demand. 
B)  an increase in labor supply. 
C)  a decrease in labor demand. 
D)  a decrease in labor supply. 
A)  an increase in labor demand. 
B)  an increase in labor supply. 
C)  a decrease in labor demand. 
D)  a decrease in labor supply.

Question 16

Suppose the government reduces marginal income tax rates and increases welfare payments. This policy combination will:

Accepted Answer

A)  increase the incentive to work. 
B)  reduce the incentive to work. 
C)  have no effect on the incentive to work. 
D)  have an ambiguous effect on the incentive to work. 
A)  increase the incentive to work. 
B)  reduce the incentive to work. 
C)  have no effect on the incentive to work. 
D)  have an ambiguous effect on the incentive to work.

Question 17

In the 1700s and 1800s:

Accepted Answer

A)  labor laws were passed to protect workers from job-related injuries. 
B)  labor laws were passed to prevent child labor. 
C)  the invisible hand was free to push wage rates down to subsistence levels. 
D)  the invisible hand was prevented from pushing wage rates down to subsistence levels. 
A)  labor laws were passed to protect workers from job-related injuries. 
B)  labor laws were passed to prevent child labor. 
C)  the invisible hand was free to push wage rates down to subsistence levels. 
D)  the invisible hand was prevented from pushing wage rates down to subsistence levels.

Question 18

If the marginal income tax rate falls from 50 percent to 40 percent:

Accepted Answer

A)  the average tax rate rises. 
B)  the incentive to work becomes stronger. 
C)  the incentive to work becomes weaker. 
D)  after-tax wages decline. 
A)  the average tax rate rises. 
B)  the incentive to work becomes stronger. 
C)  the incentive to work becomes weaker. 
D)  after-tax wages decline.

Question 19

Entrepreneurship could best be classified as:

Accepted Answer

A)  creative labor. 
B)  simple labor. 
C)  unskilled labor. 
D)  highly specialized labor. 
A)  creative labor. 
B)  simple labor. 
C)  unskilled labor. 
D)  highly specialized labor.

Question 20

The elasticity of labor demand does not depend on the:

Accepted Answer

A)  elasticity of demand for the firm's product. 
B)  relative importance of the factor in the production process. 
C)  possibility of and cost of substitution in production. 
D)  elasticity of labor supply. 
A)  elasticity of demand for the firm's product. 
B)  relative importance of the factor in the production process. 
C)  possibility of and cost of substitution in production. 
D)  elasticity of labor supply.

Exam 17: Work and the Labor Market

The marginal revenue product of an input tends to decrease as:

Institutional discrimination exists when:

A decrease in the wages of truck drivers might be explained by which of the following factors?

Researchers have found that the income of obese women is about 17 percent lower than that of women who are of the recommended weight. This result implies that:

If a single union supplies all the labor in a competitive labor market, the union probably will:

Discrimination based on characteristics that are related to job performance may be in the economic best interests of a firm.

A monopsonist facing many suppliers of labor will employ:

Which of the following will shift the labor demand curve to the right?

The demand for labor is derived from the demand for output.

The Chicago City Council considered a "living wage" ordinance that would raise the minimum wage in Chicago to about $10 an hour. How did most economists probably view this legislation?

The price of apples is currently $1 per pound. If apples are sold in a competitive market and the price of apples increases to $2 per pound, the marginal revenue product (MRP) of labor used to produce apples would:

Supply and demand analysis can explain:

Which of the following does Luddite reasoning get correct?

Suppose wages increase but employment decreases. These changes most likely were caused by:

Suppose the government reduces marginal income tax rates and increases welfare payments. This policy combination will:

In the 1700s and 1800s:

If the marginal income tax rate falls from 50 percent to 40 percent:

Entrepreneurship could best be classified as:

The elasticity of labor demand does not depend on the:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

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