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

Use the following to answer questions:  
-(Table: Employment and Output) In the table Employment and Output, if the price of a bushel of wheat is $10 and the price of labor (wage) is $120, then the profit-maximizing quantity of labor is:

Accepted Answer

A)  one. 
B)  three. 
C)  four. 
D)  six. 
A)  one. 
B)  three. 
C)  four. 
D)  six.

Question 3

If the age at which a person can receive Social Security benefits increases from 67 to 70, the supply of labor will increase.

Accepted Answer

A) True 
 B)False

Question 4

If leisure is a normal good for Randy, then both the substitution effect and the income effect of a decrease in the wage rate will cause Randy to work fewer hours.

Accepted Answer

A) True 
 B)False

Question 5

Since the Great Recession, which began in 2008, the U.S. labor supply curve has shifted to the left because many workers were disillusioned by bad job prospects and left the labor force.

Accepted Answer

A) True 
 B)False

Question 6

The equilibrium value of the marginal product of a factor is the additional value produced by the last unit of that factor employed in the factor market as a whole.

Accepted Answer

A) True 
 B)False

Question 7

Use the following to answer questions:
Figure: Davina's Labor Supply Choice  
-(Figure: Davina's Labor Supply Choice) The figure Davina's Labor Supply Choice shows Davina's time allocation budget line when her hourly wage is $10 or $15 and she has 80 hours to allocate between labor and leisure; it also shows two of her indifference curves for income and leisure. When Davina earns $15 per hour, she works _____ hours and enjoys _____ hours of leisure.

Accepted Answer

A)  20; 60 
B)  30; 50 
C)  40; 40 
D)  50; 30 
A)  20; 60 
B)  30; 50 
C)  40; 40 
D)  50; 30

Question 8

Suppose a firm sells a good for a perfectly competitive price of $5. The equilibrium wage rate is $10. The first worker it hires produces five units. Two workers produce a total of nine units. Given this information, the firm will:

Accepted Answer

A)  hire the first worker only. 
B)  hire both the first and second workers. 
C)  not hire either worker. 
D)  hire only the second worker. 
A)  hire the first worker only. 
B)  hire both the first and second workers. 
C)  not hire either worker. 
D)  hire only the second worker.

Question 9

Regardless of gender and ethnicity, more education is associated with higher median earnings.

Accepted Answer

A) True 
 B)False

Question 10

Use the following to answer questions:  
-(Table: Workers and Corn Output) Look at the table Workers and Corn Output. Laura is a price-taking farmer who produces corn. Assume the wage rate for workers is $250 and the price per bushel of corn is $20. Laura should hire _____ workers to maximize profits.

Accepted Answer

A)  one 
B)  two 
C)  four 
D)  seven 
A)  one 
B)  two 
C)  four 
D)  seven

Question 11

If an individual labor supply curve is negatively sloped, the substitution effect dominates the income effect.

Accepted Answer

A) True 
 B)False

Question 12

Over the past 30 years the premium for workers with advanced degrees has decreased.

Accepted Answer

A) True 
 B)False

Question 13

The firm's value of the marginal product of labor curve:

Accepted Answer

A)  is the firm's demand curve for labor. 
B)  is the industry's demand curve for labor. 
C)  is the same as the marginal cost curve for labor. 
D)  slopes upward. 
A)  is the firm's demand curve for labor. 
B)  is the industry's demand curve for labor. 
C)  is the same as the marginal cost curve for labor. 
D)  slopes upward.

Question 14

Workers with more human capital usually generate a higher value of the marginal product.

Accepted Answer

A) True 
 B)False

Question 15

A firm's demand curve for labor will shift because of:

Accepted Answer

A)  a decrease in the wage rate. 
B)  an increase in the wage rate. 
C)  changes in preferences and the cultural norms that define how much we work. 
D)  a change in the product's price. 
A)  a decrease in the wage rate. 
B)  an increase in the wage rate. 
C)  changes in preferences and the cultural norms that define how much we work. 
D)  a change in the product's price.

Question 16

The equilibrium value of the marginal product of a factor is the additional value produced by the _____ unit of that factor employed in the factor market as a whole.

Accepted Answer

A)  first 
B)  last 
C)  most productive 
D)  least productive 
A)  first 
B)  last 
C)  most productive 
D)  least productive

Question 17

In the U.S. labor market, White men have the highest median earnings.

Accepted Answer

A) True 
 B)False

Question 18

An efficiency wage is:

Accepted Answer

A)  above the equilibrium wage and is paid to provide workers with an incentive increase productivity. 
B)  efficient because it is exactly equal to the wage rate implied by the marginal productivity theory. 
C)  determined by collective bargaining between unions and management. 
D)  equal to the value of the marginal product of labor adjusted so as to make the structure of compensation more equitable. 
A)  above the equilibrium wage and is paid to provide workers with an incentive increase productivity. 
B)  efficient because it is exactly equal to the wage rate implied by the marginal productivity theory. 
C)  determined by collective bargaining between unions and management. 
D)  equal to the value of the marginal product of labor adjusted so as to make the structure of compensation more equitable.

Question 19

Use the following to answer questions:  
-(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. Assume that the market for power cords is perfectly competitive. If the price of a power cord is $2 and the market wage rate is $60 per hour, the profit-maximizing quantity of labor is _____ workers.

Accepted Answer

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

Question 20

Use the following to answer questions:
Figure: Rita's Time Allocation Budget Line  
-(Figure: Rita's Time Allocation Budget Line) Look at the figure Rita's Time Allocation Budget Line. It is based on 80 hours available for labor and leisure. Her hourly wage is:

Accepted Answer

A)  $5.60. 
B)  $7.00. 
C)  $8.00. 
D)  $10.00. 
A)  $5.60. 
B)  $7.00. 
C)  $8.00. 
D)  $10.00.

Large disparities in wages are often used as:

Use the following to answer questions: -(Table: Employment and Output) In the table Employment and Output, if the price of a bushel of wheat is $10 and the price of labor (wage) is $120, then the profit-maximizing quantity of labor is:

If the age at which a person can receive Social Security benefits increases from 67 to 70, the supply of labor will increase.

If leisure is a normal good for Randy, then both the substitution effect and the income effect of a decrease in the wage rate will cause Randy to work fewer hours.

Since the Great Recession, which began in 2008, the U.S. labor supply curve has shifted to the left because many workers were disillusioned by bad job prospects and left the labor force.

The equilibrium value of the marginal product of a factor is the additional value produced by the last unit of that factor employed in the factor market as a whole.

Suppose a firm sells a good for a perfectly competitive price of $5. The equilibrium wage rate is $10. The first worker it hires produces five units. Two workers produce a total of nine units. Given this information, the firm will:

Regardless of gender and ethnicity, more education is associated with higher median earnings.

Use the following to answer questions: -(Table: Workers and Corn Output) Look at the table Workers and Corn Output. Laura is a price-taking farmer who produces corn. Assume the wage rate for workers is $250 and the price per bushel of corn is $20. Laura should hire _____ workers to maximize profits.

If an individual labor supply curve is negatively sloped, the substitution effect dominates the income effect.

Over the past 30 years the premium for workers with advanced degrees has decreased.

The firm's value of the marginal product of labor curve:

Workers with more human capital usually generate a higher value of the marginal product.

A firm's demand curve for labor will shift because of:

The equilibrium value of the marginal product of a factor is the additional value produced by the _____ unit of that factor employed in the factor market as a whole.

In the U.S. labor market, White men have the highest median earnings.

An efficiency wage is:

Use the following to answer questions: Figure: Rita's Time Allocation Budget Line -(Figure: Rita's Time Allocation Budget Line) Look at the figure Rita's Time Allocation Budget Line. It is based on 80 hours available for labor and leisure. Her hourly wage is:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals 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 Common Resources

The Economics of the Welfare

Uncertainty, Risk, and Private Information

Filters

Exam 19: Factor Markets and the Distribution of Income

Large disparities in wages are often used as:

Use the following to answer questions: -(Table: Employment and Output) In the table Employment and Output, if the price of a bushel of wheat is $10 and the price of labor (wage) is $120, then the profit-maximizing quantity of labor is:

If the age at which a person can receive Social Security benefits increases from 67 to 70, the supply of labor will increase.

If leisure is a normal good for Randy, then both the substitution effect and the income effect of a decrease in the wage rate will cause Randy to work fewer hours.

Since the Great Recession, which began in 2008, the U.S. labor supply curve has shifted to the left because many workers were disillusioned by bad job prospects and left the labor force.

The equilibrium value of the marginal product of a factor is the additional value produced by the last unit of that factor employed in the factor market as a whole.

Suppose a firm sells a good for a perfectly competitive price of $5. The equilibrium wage rate is $10. The first worker it hires produces five units. Two workers produce a total of nine units. Given this information, the firm will:

Regardless of gender and ethnicity, more education is associated with higher median earnings.

If an individual labor supply curve is negatively sloped, the substitution effect dominates the income effect.

Over the past 30 years the premium for workers with advanced degrees has decreased.

The firm's value of the marginal product of labor curve:

Workers with more human capital usually generate a higher value of the marginal product.

A firm's demand curve for labor will shift because of:

The equilibrium value of the marginal product of a factor is the additional value produced by the _____ unit of that factor employed in the factor market as a whole.

In the U.S. labor market, White men have the highest median earnings.

An efficiency wage is:

Use the following to answer questions: Figure: Rita's Time Allocation Budget Line -(Figure: Rita's Time Allocation Budget Line) Look at the figure Rita's Time Allocation Budget Line. It is based on 80 hours available for labor and leisure. Her hourly wage is:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals 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 Common Resources

The Economics of the Welfare

Uncertainty, Risk, and Private Information

Filters