Question 1

Large disparities in wages are often used as:

Accepted Answer

A) evidence of the importance of profit maximization. 
B) a means to question the validity of the marginal productivity theory of income distribution. 
C) evidence of diminishing returns. 
D) evidence to illustrate the absence of market failures in factor markets. 
A) evidence of the importance of profit maximization. 
B) a means to question the validity of the marginal productivity theory of income distribution. 
C) evidence of diminishing returns. 
D) evidence to illustrate the absence of market failures in factor markets.

Question 2

If a union is able to bargain for a wage that is higher than the equilibrium, this means that:

Accepted Answer

A) all workers will earn a wage equal to their value of marginal product. 
B) some excess supply of labor or unemployment will result at this wage rate. 
C) compensating differentials will be erased in this market. 
D) diminishing returns will not exist in this market. 
A) all workers will earn a wage equal to their value of marginal product. 
B) some excess supply of labor or unemployment will result at this wage rate. 
C) compensating differentials will be erased in this market. 
D) diminishing returns will not exist in this market.

Question 3

A profit-maximizing firm will base its decision to hire workers on the additional costs and benefits of each worker.If the extra output that is produced by hiring one more unit of labor adds more to ________ than to _ , the firm will increase its profit by increasing the use of labor.

Accepted Answer

A) total cost; total revenue 
B) total revenue; total cost 
C) marginal cost; marginal revenue 
D) marginal cost; total cost 
A) total cost; total revenue 
B) total revenue; total cost 
C) marginal cost; marginal revenue 
D) marginal cost; total cost

Question 4

The demand for factors of production is called a derived demand because it is:

Accepted Answer

A) derived from the demand for the outputs that are produced by the factors of production. 
B) derived from the available supply of factors, such as land, that can be overexploited. 
C) not easy to determine and must be derived by a technical (and often complicated) process. 
D) derived on the basis of questions posed to residents during the census. 
A) derived from the demand for the outputs that are produced by the factors of production. 
B) derived from the available supply of factors, such as land, that can be overexploited. 
C) not easy to determine and must be derived by a technical (and often complicated) process. 
D) derived on the basis of questions posed to residents during the census.

Question 5

There will be an increase in the factor demand because of a(n):

Accepted Answer

A) increase in the price of the factor. 
B) increase in the price of the good the factor produces. 
C) decrease in the price of the factor. 
D) decrease in the price of the good the factor produces. 
A) increase in the price of the factor. 
B) increase in the price of the good the factor produces. 
C) decrease in the price of the factor. 
D) decrease in the price of the good the factor produces.

Question 6

(Table: Workers and Corn Output) Laura is a price-taking farmer who produces corn.Assume the wage rate for workers is $125 and the price per bushel of corn is $10.The table Workers and Corn Output shows Laura's production function.To maximize profits Laura should employ
________ workers.

Accepted Answer

A) two 
B) three 
C) four 
D) six 
A) two 
B) three 
C) four 
D) six

Question 7

The more work a person does, all other things unchanged, then the:

Accepted Answer

A) greater his or her free time. 
B) greater his or her nonmarket use of time. 
C) less income he or she has. 
D) less leisure he or she has. 
A) greater his or her free time. 
B) greater his or her nonmarket use of time. 
C) less income he or she has. 
D) less leisure he or she has.

Question 8

The importance of human capital has been increased by technological progress.False

Accepted Answer

A) True 
 B)False

Question 9

Assume that Stan just received a promotion and raise.In terms of labor supply, the substitution effect of a higher wage will:

Accepted Answer

A) lead him to supply fewer hours of labor. 
B) lead him to supply more hours of labor. 
C) lead him to substitute leisure for work. 
D) lead to a reduction of work time to zero. 
A) lead him to supply fewer hours of labor. 
B) lead him to supply more hours of labor. 
C) lead him to substitute leisure for work. 
D) lead to a reduction of work time to zero.

Question 10

(Table: Value of the Marginal Product of Labor and Demand) In the figure Value of the Marginal Product of Labor and Demand, the total product of labor is shown for the hourly production of power cords.The price of a power cord is $2, the market wage rate is $40 per hour, and four workers are hired.Profit can be maximized by hiring worker(s).

Accepted Answer

A) one more 
B) two more 
C) one fewer 
D) two fewer 
A) one more 
B) two more 
C) one fewer 
D) two fewer

Question 11

If the wage rate rises, firms will find that:

Accepted Answer

A) their labor demand curve shifts leftward. 
B) their labor demand curve shifts rightward. 
C) they move upward and to the left along the labor demand curve. 
D) they move downward and to the right along the labor demand curve. 
A) their labor demand curve shifts leftward. 
B) their labor demand curve shifts rightward. 
C) they move upward and to the left along the labor demand curve. 
D) they move downward and to the right along the labor demand curve.

Question 12

Scenario: The Decision to Hire Labor Assume that both the product market and the labor market are perfectly competitive.The price of
This firm's product is $5.The firm's total product with respect to labor is given in the table that follows.
(Scenario: The Decision to Hire Labor) Look at the scenario The Decision to Hire Labor.What is the VMP of the third worker to this firm?

Accepted Answer

A) $5 
B) $25 
C) $18 
D) $10 
A) $5 
B) $25 
C) $18 
D) $10

Question 13

In terms of labor supply, the substitution effect of a higher wage causes a(n):

Accepted Answer

A) increase in leisure time. 
B) increase in the quantity of labor supplied. 
C) substitution of leisure for work. 
D) reduction of work time to zero. 
A) increase in leisure time. 
B) increase in the quantity of labor supplied. 
C) substitution of leisure for work. 
D) reduction of work time to zero.

Question 14

For the Tampa Bay Rays baseball team, the value of the marginal product curve is the team's labor ________ curve.This means the marginal product curve has a slope.

Accepted Answer

A) demand; positive 
B) supply; positive 
C) demand; negative 
D) supply; negative 
A) demand; positive 
B) supply; positive 
C) demand; negative 
D) supply; negative

Question 15

Which of the following statements is true?

Accepted Answer

A) Leisure is a normal good. 
B) Leisure is an inferior good. 
C) All other things unchanged, an increase in income will decrease the demand for leisure. 
D) The demand for leisure is perfectly inelastic. 
A) Leisure is a normal good. 
B) Leisure is an inferior good. 
C) All other things unchanged, an increase in income will decrease the demand for leisure. 
D) The demand for leisure is perfectly inelastic.

Question 16

John and Deanna are married with two children.Both adults have college degrees, but Deanna has chosen not to enter the labor force, while John has worked continuously for 10 years.Suppose Deanna decides to enter the labor force and gets a job with John's employer.She is offered a salary that is $15,000 below John's.Is Deanna being discriminated against because she is a woman? Support your answer.

Accepted Answer

Probably not.Although both John and Dean

Question 17

An increase in wealth will cause the labor supply curve to:

Accepted Answer

A) shift leftward if leisure is a normal good. 
B) slope downward if the substitution effect dominates the income effect. 
C) slope upward if leisure is an inferior good. 
D) bend backward if the income effect outweighs the substitution effect of a change in wealth and leisure is a normal good. 
A) shift leftward if leisure is a normal good. 
B) slope downward if the substitution effect dominates the income effect. 
C) slope upward if leisure is an inferior good. 
D) bend backward if the income effect outweighs the substitution effect of a change in wealth and leisure is a normal good.

Question 18

Labor with a particular skill level and training is used in only two industries: grape cultivation and cranberry cultivation.Which of the following is likely to cause an increase in the demand for this type of labor?

Accepted Answer

A) improved technology that leads to more efficient machines for grape picking 
B) publication of a report asserting that drinking two glasses of grape or cranberry juice every day improves digestion and heart health 
C) a report by the USDA that an increasing proportion of imported grapes are contaminated with unacceptable pesticides 
D) a decrease in the amount of land used for growing cranberries 
A) improved technology that leads to more efficient machines for grape picking 
B) publication of a report asserting that drinking two glasses of grape or cranberry juice every day improves digestion and heart health 
C) a report by the USDA that an increasing proportion of imported grapes are contaminated with unacceptable pesticides 
D) a decrease in the amount of land used for growing cranberries

Question 19

A factor demand curve will shift to the left because of:

Accepted Answer

A) an increase in the price of the factor. 
B) an increase in the price of the good the factor produces. 
C) a decrease in the price of the factor. 
D) a decrease in the price of the good the factor produces. 
A) an increase in the price of the factor. 
B) an increase in the price of the good the factor produces. 
C) a decrease in the price of the factor. 
D) a decrease in the price of the good the factor produces.

Question 20

According to the __ , workers may earn a wage rate higher than the value of its marginal product because that provides an incentive to perform efficiently.

Accepted Answer

A) marginal productivity of income distribution theory 
B) efficiency-wage model 
C) diminishing-returns theory 
D) increasing-returns model 
A) marginal productivity of income distribution theory 
B) efficiency-wage model 
C) diminishing-returns theory 
D) increasing-returns model

Large disparities in wages are often used as:

If a union is able to bargain for a wage that is higher than the equilibrium, this means that:

A profit-maximizing firm will base its decision to hire workers on the additional costs and benefits of each worker.If the extra output that is produced by hiring one more unit of labor adds more to ________ than to _ , the firm will increase its profit by increasing the use of labor.

The demand for factors of production is called a derived demand because it is:

There will be an increase in the factor demand because of a(n):

(Table: Workers and Corn Output) Laura is a price-taking farmer who produces corn.Assume the wage rate for workers is $125 and the price per bushel of corn is $10.The table Workers and Corn Output shows Laura's production function.To maximize profits Laura should employ ________ workers.

The more work a person does, all other things unchanged, then the:

The importance of human capital has been increased by technological progress.False

Assume that Stan just received a promotion and raise.In terms of labor supply, the substitution effect of a higher wage will:

If the wage rate rises, firms will find that:

In terms of labor supply, the substitution effect of a higher wage causes a(n):

For the Tampa Bay Rays baseball team, the value of the marginal product curve is the team's labor ________ curve.This means the marginal product curve has a slope.

Which of the following statements is true?

An increase in wealth will cause the labor supply curve to:

Labor with a particular skill level and training is used in only two industries: grape cultivation and cranberry cultivation.Which of the following is likely to cause an increase in the demand for this type of labor?

A factor demand curve will shift to the left because of:

According to the __ , workers may earn a wage rate higher than the value of its marginal product because that provides an incentive to perform efficiently.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Uncertainty, Risk, and Private Information

Filters

Exam 19: Factor Markets and the Distribution of Income

Large disparities in wages are often used as:

If a union is able to bargain for a wage that is higher than the equilibrium, this means that:

A profit-maximizing firm will base its decision to hire workers on the additional costs and benefits of each worker.If the extra output that is produced by hiring one more unit of labor adds more to ________ than to _ , the firm will increase its profit by increasing the use of labor.

The demand for factors of production is called a derived demand because it is:

There will be an increase in the factor demand because of a(n):

(Table: Workers and Corn Output) Laura is a price-taking farmer who produces corn.Assume the wage rate for workers is $125 and the price per bushel of corn is $10.The table Workers and Corn Output shows Laura's production function.To maximize profits Laura should employ ________ workers.

The more work a person does, all other things unchanged, then the:

The importance of human capital has been increased by technological progress.False

Assume that Stan just received a promotion and raise.In terms of labor supply, the substitution effect of a higher wage will:

If the wage rate rises, firms will find that:

In terms of labor supply, the substitution effect of a higher wage causes a(n):

For the Tampa Bay Rays baseball team, the value of the marginal product curve is the team's labor ________ curve.This means the marginal product curve has a slope.

Which of the following statements is true?

An increase in wealth will cause the labor supply curve to:

Labor with a particular skill level and training is used in only two industries: grape cultivation and cranberry cultivation.Which of the following is likely to cause an increase in the demand for this type of labor?

A factor demand curve will shift to the left because of:

According to the __ , workers may earn a wage rate higher than the value of its marginal product because that provides an incentive to perform efficiently.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Uncertainty, Risk, and Private Information

Filters